Bucharest already has one EU warning about the deviation of medium-term budgetary projections. Both procedures are part of the rules of the Stability and Growth Pact. At the end of November, Moody’s credit rating agency reported some problems for the Romanian economy.
In the autumn forecast, the European Commission (EC) said they saw a deterioration in the structural balance (1.1% of gross domestic product) in the budget in 2017. In addition, the projected deficit would exceed 3%, such as the marginal limit, enshrined in the Maastricht Treaty. The EC expects that Romania will end in 2017 with a budget deficit of 3.3%, which will also mean the beginning of a budget deficit procedure.
Bucharest also receives criticism of rising costs – up to 4.9% of GDP, on a recommendation by the Council for spending to 3.3% of GDP.
Finance ministers recommend Romania’s economic growth be used to reduce the budget deficit, it is clear from the Council’s communication. Bucharest was given a deadline of 15 April 2018 to respond to today’s recommendations. In a separate decision, the finance ministers terminated the excessive budget deficit procedure led by the UK since 2008. It has been prolonged several times, and the Council warned that London is doing nothing to meet the recommendations. But now the data shows that the British government is closing the deficit below 3%. In 2015-2016 it was reduced to 4% of GDP and in 2016-2017 to 2.3%.
The expectations are that the UK will continue to reduce its deficit in the coming years – to 1.8% of GDP in 2018-2019 and to 1.3% in 2018-2019. In the autumn forecast, the EC also noted the improvement of the structural balance of the budget between 2008-2009 and 2016-2017.
At the same time, the country’s public debt doubled in this period – from 41% to 86.8% of GDP.