Next year’s budget draft will probably be built on a consolidated deficit estimation of about 3.5% of GDP, said Finance Minister Florin Citu. Citu looked even more concerned than in the first days at the finance ministry, earlier this month, when he declared that the public finances situation was worse than he expected. Besides, PM Ludovic Orban has recently stated that the government identified with each day, more and more problems left by the former ruling PSD.
Citu recently presented the second budget revision for this year, widening the deficit at 4.3% of GDP from 2.76% of GDP, the PSD government’s target. He was initially positive about narrowing it back to the 3%-of-GDP cap in 2020, with keeping pension and wage hike commitments.
We believe that the PNL government has no choice but leave the deficit above the 3%-of-GDP cap next year because it cannot afford to take unpopular measures in elections year. However, some fiscal consolidation and more efforts to improve collection must be initiated. Even so, the EU’s excessive deficit procedure is very likely next year, in our view.