FIC: Solid budget structure that guarantees the economic recovery
Bucharest, 22nd of September, 2020
In order for Romania to have an economic future that transcends electoral cycles, especially at a time when the health crisis has caused turbulence for both the economy and companies, the most responsible gesture from the legislative authorities would be to ensure a budget structure that guarantees the economic recovery.
The recently adopted measures which will bring structural changes in the budget will generate, according to the National Bank of Romania the largest deficit in recent years: - 11% of GDP. These changes will have an impact on Romania's ability to access significant amounts of European funds and could trigger modifications in the ratings of international agencies. One of the major problems with such a large budget deficit is the difficulty or even impossibility of financing it on the financial markets. This decision could trigger downgrade actions from rating agencies (hence further increasing the cost of public debt with a ripple effect of the whole Romanian economy) in the absence of a credible repayment strategy. Consequently, Romania's competitiveness will be weakened from within and regaining the advantage lost in this way will bring additional costs in the medium term.
Romania is already under the excessive deficit procedure and must present this month to the European Commission a fiscal consolidation strategy, as well as the National Recovery and Resilience Plan to substantiate the allocation and financing from the EU.
In our opinion, the only way to solve the problems facing Romania's economic recovery is that all decision makers cooperate – the Parliament, the Government, the President - when the public agenda requires the adoption of measures that could affect the entire society.