BUCHAREST – Pension hike in the spotlight

Romania’s Parliament will today vote on a controversial amendment to the budget law that, if adopted, will increase pensions by 40% despite a ballooning budget deficit. A law adopted by the socialist-controlled Parliament last year stated that the pensions will rise by 40% as of 1 September 2020.
The centre-right government, installed in November 2019, changed the law, awarding only a 14% increase, citing budgetary pressures. But the socialist party (PSD) vowed to push for the 40% hike.
In a budget revision adopted in August, the government kept an increase of 14%, which is lower than the one included in the pension law, but still accounts for 0.8% of gross domestic product for this year. But the budget deficit estimate for this year was revised to 8.6% of GDP, from 6.7% of GDP previously. Budget revenue decreased following the lower economic activity due to the COVID-19 epidemic, while expenditure rose to cover healthcare and state support measures.
But the socialists insist the full increase can be granted, as the government could cut other budgetary chapters, which have sums not yet awarded.
However, even if the government manages to close this year with an acceptable deficit, the full 40% increase would push the budget deficit to 11% of GDP in 2021, the central bank warned in a report published Monday.
Romania holds local elections on Sunday (27 September), while general elections are scheduled for early December.

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