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AmCham Romania News AmCham Analysis: The 2021 State Budget – a Step Ahead Towards Romania’s Development Through Investments and Fiscal Consolidation

AmCham Analysis: The 2021 State Budget – a Step Ahead Towards Romania’s Development Through Investments and Fiscal Consolidation

by AmCham Romania February 18, 2021

In the context of the debates on the 2021 State Budget project, AmCham Romania highlights a series of positive aspects, as well as areas that call for an increased attention in the budget execution.

First of all, regarding expenditures, a component on which the business community has always called for an efficient and prudent approach, similar to the private sector practice, we welcome the fact that the proposed budget is a consolidation one, by limiting direct expenditures.

In terms of expenditures, we notice an important increase allocation for investments, which would double compared to the pre-pandemic years to an unprecedented level for Romania.

The investments are intended for infrastructure, health and education, areas that AmCham Romania considers essential, and which we believe could have benefited from additional allocations. We hope that these targets will be enabled by increasing the administrative capacity for their execution, a chapter in which Romania has significant potential for improvement.

Secondly, regarding ​​revenues, increasing the collection rate remains a promise made by many governments, yet to be fulfilled, which leads us to believe that the government that will achieve this performance will remain in Romania's economic history. In this context, the draft budget should include concrete measures to increase the tax collection revenues by modernizing and digitizing the tax administration, helping it both nearing the EU average and reducing the informal economy.

As EU funds continue to be the main source of financing for investment projects, it is imperative for the budget execution and the overall economic growth for Romania to accelerate the absorption rate from 2021 onwards. The immediate priority in this regard is the completion of the National Recovery and Resilience Plan. And not only formally, but by advancing real projects and reforms.

Overall, we welcome the start of fiscal consolidation, but at the same time we believe that more courageous measures are needed to limit the structural deficit for 2022 – 2024 (as for the time being it remains well above the midterm objective), both by reducing expenditures and by increasing the collection rate of fiscal revenues and a major improvement of the EU funds absorption.

We trust that a coherent State Budget, reflecting the economic realities and addressing the current challenges, correlated with a well-designed National Recovery and Resilience Plan, will be defining for the way Romania will use the window of opportunity 2021-2023, until the next elections, to achieve structural reforms, maintain macroeconomic balance and capitalize on opportunities to reposition the Romanian economy in the global value chain.

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