Field: Finances and financial capital

Subfield: Finances

Details:

Public deficit reflects the existence of an imbalance between the total revenues (taxes, the positive result of state-owned enterprises, royalties) and the total expenditures (wages of public sector staff, social welfare, pensions, public services, investments made by the state). Public deficit appears as a consequence of oversized public expenditures compared to the state’s capacity to collect revenues (mainly taxes for the public budget). Public deficit is dangerous because it is most often covered through public debt expansion, which involves a subsequent increase in taxes or inflation. Deficit becomes problematic when it is caused by expenses that cannot be cut down easily because of collapsing economy (structural deficit), or by expenses that are not directly linked to a nation’s development (public investments). A large part of Romania’s GDP growth has been fed by deficit accumulated over the years: 17% mean growth of the annual public deficit (in the last 20 years), with just 9.5% mean economic growth. In the last 21 years, Romania has accumulated a deficit of over 70 billion Euro, an annual average of 3.5 billion Euro (the annual equivalent of approximately 350 kms of highway).