The Minister of Investments and European Projects, Adrian Câciu, recently stated that Romania is among the few countries in the European Union whose budget deficit is driven by investments
In a Facebook post, Câciu emphasized the importance of investments, asserting that “the only path to development is investment push.” He explained how the conjunctural deficit (2-3 years), generated by investments, can be “repaired” through their multiplication effect, which contributes to increasing revenues for the economy and budget while reducing spending pressure.
His response follows a warning from Fitch analysts that Romania risks losing its “investment-grade” rating if it does not curb its budget deficit, which is now the highest in the EU. This could have serious consequences for the country’s financial credibility and its ability to attract foreign investors.
Câciu also provided historical data on the budget deficits of EU member states over the past 30 years, highlighting that there is no EU country that has not exceeded the 3% budget deficit threshold in at least two years. All member states have experienced periods of accelerated development based on investments, particularly due to European funds allocated for infrastructure, during which the deficit exceeded 3% of GDP.
Câciu illustrated by comparing Romania with other European countries: France and Greece had deficits greater than 3% of GDP in 23 out of the last 30 years, Hungary, Poland, and Portugal in 22 years, while Romania did so in 17 years. This statistic demonstrates that a temporary budget deficit associated with investments is a common practice among EU countries, especially during periods of economic convergence.
Furthermore, Adrian Câciu stressed that Romania will follow the same model during the 2023-2027 period, focusing on a “big push for investments.” This strategy is essential for stimulating the Romanian economy, especially as the European Commission estimates that 12 EU countries will exceed the 3% budget deficit criterion in 2024.
Fitch analysts mentioned that Romania may need swift measures to freeze spending and increase revenues to reduce the deficit to 3% of GDP by 2027. The budget deficit is projected to decrease to 5.8% of GDP in 2024, without significant budgetary measures.
Romania is under the EU excessive deficit procedure and has requested a seven-year period, starting in 2024, to reach the 3% limit but has not yet presented a clear plan.
In conclusion, Romania is at a critical juncture where it is essential to balance the need for investments with responsible deficit management. This is a complex yet necessary challenge to maintain investor confidence and ensure sustainable economic development in the long term.
