Fiscal Council's Dumitru: I don't know whether we can keep within 3pct budget deficit in 2018

The 3 percent budget deficit target might not be observed in 2018 and probably adjustment measures will be needed for next year, Chairman of the Fiscal Council Ionut Dumitru stated on Thursday. 

"We don't know how the fiscal policy configuration would look like in 2018. Currently, we have a fiscal package which is approved, but we don't know how the budget would look like. If we take a look at the measures which are in force today I don't know if we can keep within the 3 percent budget deficit in 2018. What we currently know is, giving the legally enacted measures, that 3 percent is probably far away, our forecasts show an upwards deficit. (...) Prior to this fiscal package and the shift of our contributions, we had a rather high deficit projection, of over 4 percent, 4.5 percent. At this time, it is likely that there is still a fairly significant gap, probably adjustment measures will be needed for the next year," Dumitru explained. 

He mentioned that the measures recently adopted by the Government, the entire package, as estimated by the Finance Ministry, will have a negative impact of approximately 5.1 billion lei. 

Furthermore, the Chairman of the Fiscal Council underscored that too much stimulation of demand, consumption, fuels imports and doesn't help too much the local economy, but rather other economies. 

The Gov't approved on Wednesday the bill amending the Tax Code, which stipulates the shift of social contribution from employer to employee and the decrease of income tax from 16 percent to 10 percent. 

As of 1 January 2018, the contributions paid for the gross salary will drop by two percentage points, from 39.25 percent to 37.25 percent, but from the total of 22.75 percent of the employer's contributions, 20 percentage points are to be transferred to the employee. Therefore, of the gross salary, 35 percent will represent contributions retained by the employer on behalf of the employee, and the remaining contributions of the employer, namely 2.75 percent (after the transfer of 20 points per employee), will decrease to 2.25 percent, and will cover the risks of unemployment, accidents at work, sick leave, wage claims. 

Furthermore, the Executive also adopted the draft law which stipulated the decline of contribution to Pension Pillar II from 5.1 percent to 3.75 percent. 

According to the autumn economic forecast published on Thursday by the community Executive, the public deficit would reach 3 percent of the GDP in 2017, to further worsen to 3.9 percent of the GDP in 2018 and reach 4.1 percent in 2019. AGERPRES .