Romania has the most fragile budget in the EU, says Neacsu (Erste Asset Management)

Dragos Neacsu, the CEO of Erste Asset Management, says that authorities need to be very prudent in terms of public spending this year, citing similar evaluations made by international financial institutions and rating agencies.

Neacsu said that the biggest challenge for Romania is the fact that it has the smallest amount of fiscal revenue as percentage of GDP out of all European Union member states.

“No matter what ideology or side you follow, the government has on its hands the most fragile budget out of all the European Union member states. Romania has the smallest share of fiscal revenue in GDP, of around 25 percent, which is 10 percentage points less that states in Central Europe, with which we use to compare ourselves. Hungary has 38 percent, Croatia 37 percent, The Czech Republic and Poland have 34 percent and 35 percent, respectively,” said Neacsu, who is also the member in the managing board of Romanian Business Leaders (RBL) association, according to HotNews.ro.

Neacsu added that the RBL submitted a letter to the government to call for an impact assessment of the planned hike of wages in the public sector.

Meanwhile, the center-left government led by Sorin Grindeanu suggested that the overhaul of the income taxation system for individuals would contribute to the reduction of the tax evasion in the country. According to the plans of authorities, fiscal consultants would help each household pay taxes each year, based on a system that includes certain deductions.

This system should be rolled out next year.

The Fiscal Council estimates that Romania’s collection of taxes is projected to reach 25.4 percent of GDP in 2017 and 2018. This figure stood at 26.1 percent in 2016.