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The draft budget for the year 2020 is built on an economic growth of 4.1 pct, a budget deficit of 3.59 pct and an average inflation rate of 3.1 pct, according to the Report on the macroeconomic situation on 2020 and its projection on years 2021-2023 published on Tuesday morning on the website of the Ministry of Public Finances (MFP).
The cash budget deficit target for 2020 is estimated at 3.59 pct of the GDP (40.545 billion lei), while the ESA deficit is estimated at 3.58 of the GDP, to reach 1.94 pct in 2023, thus fitting in with the provisions of the European regulations.
The current account deficit is forecast at 10.6 billion euro in 2020, having a share in the GDP that dropped as compared to the previous year, namely 4.5 pct, with a trade balance deficit of 7.7 pct of the GDP.
The Gross Domestic Product in current prices is estimated at 1,129.2 billion RON for 2020, increasing compared to the value of 1,040.8 billion lei reported for this year.
"Investments are the motor of economic growth and job creation, with a multiplying effect and a direct participation in the gross formation of fixed capital. For the year 2020 investments are estimated at 4.5 pct of the GDP, an increase of 6.3 billion lei over the year 2019," the draft shows.
The average gross wage has a value of 5,429 RON in 2020, and the net wage stands at 3,324 RON. The unemployment rate in 2020 is estimated at 3 pct, compared to 3.2 pct in 2019, and the number of unemployed persons stands at 275,000.
An increase in the number of employees by 1.9 pct is expected concomitantly with the reduction of the unemployment rate recorded at 3.0 pct at the end of 2020.
For the year 2020, it is estimated that inflation will be reduced as a yearly average down to 3.1 pct, as well as to 3.0 pct by the end of the year.
The measures that underpinned the budget construction for the 2020-2023 horizon were: eliminating the mechanism for the individual payment of the VAT in view of making it compatible with the community acquis in the domain; the forced execution of sums existent in the VAT account will be applied appropriately by credit institutions, up to the limit of the total amount of budget obligations, as it is individualized in the address establishing the lien.
In 2020, 2 pct of the GDP is ensured for defence.
According to the MFP, in this context a responsible and credible budget construction is imposed, as well as avoiding pro-cyclic policies, the creation of fiscal space, vital in emerging economies in times of great incertitude and easily changeable financial markets, arguments for avoiding the deterioration of financial stability, evaluating sovereign risk, the financing and dynamic of the economy and for support from the business environment and external partners.
"The measures that underpin the budget construction for 2020 and the 2021-2022 perspective, as well as the downward development of the budget deficit on the medium term indicate the clear trend for the gradual elimination of the pro-cyclical fiscal policy, the year 2020 being the first step to return to the target deficit of below 2 pct of the GDP mentioned in the Maastricht Treaty," the document also mentions.
