Romanian MoF should focus on lower expenditures…

..not on higher revenues

The new Minister of Finance, Bogdan Dragoi, presented yesterday his priorities for the length of his mandate. Here are the first three:

    • The number one priority is to ensure a sustainable economic growth.
    • Another priority is structural funds accession.
    •  Until now the Ministry of Finance has focused on bringing sustainability to public expenditures but from now on we will focus on increasing public revenues.

The first two are just political propaganda. However, the third one raises few interesting issues. My main problem is with the obsession, or at least the appearance of, of the Romanian Governments with increasing public revenues. Usually this claim is inserted in the official speech right after the speaker prophets his/her allegiance to lower government expenditures. As usual the data shows something else. It shows that the only reasons Romanian governments want to increase revenues is to finance higher and higher expenditures.

Here is the data.

The first graph shows public expenditures and revenues as percentage of GDP.  From this graph it does not look to me that Romanian Governments since 2005 showed any concern for public expenditures. For all the talk about fiscal consolidation the data shows public expenditures increasing as percentage of GDP from 33% in 2004 to 39% in 2010.

Of course some critics will quickly point out that looking at the data in percentage of GDP could be misleading. Not necessarily. Faster GDP increase between 2006 to 2008 was understanding the expenditures while the 2009 to 20011 slower increase overstated them . But to put this concern to rest here is a graph looking at expenditures and revenues in billions of RON. The real data if you will. As you can see the impression that we got from the previous graph is mirrored by the evidence in the second graph.

I wrote this post because I was uneasy with more “efforts” from the Romanian government to increase their revenues. As those graphs show the problem is with increasing expenditures not with revenues. The efforts of our public officials should be focusing on cutting  public expenditures which have increased even during the recessionary period, albeit at a lower pace.

So, if I am allowed to give a small piece of advice to our new Ministers of Finance is to put on top of his priority list lower expenditures and lower taxes and leave the “revenues” to the economy to spend as it pleases.

8 thoughts on “Romanian MoF should focus on lower expenditures…

  1. Daca State Revenues sunt intr-o asa crestere inseamna ca totusi economia merge bine cu toate firmele care au pleat din romania, sau mai bine zis in ciuda tuturor firmelor care au plecat din romania sau a celor care inca exista dar isi externalizeaza profiturile. Asa ca nu vad de ce se plange poporul?
    Pe de alta parte – eu nu prea ma pricep la macroeconomie – ce cuprind aceste State Revenues? Includ si imprumuturile? Daca da, atunci ar trebui un grafic mai aproape de realitate fara imprumuturi. Daca nu, atunci sa nu se mai planga nimeni ca economia nu merge sau ca guvernul nu e bun!

    1. @Ion
      Cresterea veniturilor din 2010 si 2011 nu vine ca urmare a cresterii economice. Este aproape in totalitate “meritul” TVA. Daca te uiti la grafic in 2009 venituriel scad in timp ce cheltuielile cresc. In loc sa scada cheltuielile politica economica a ales sa creasca veniturile. Si se pare ca si in 2012 se merge tot pe “crestere” venituri.

  2. Chiar daca a venit din taxe, atata vreme cat vine din economie inseamna ca 1) eonomia produce destul incat sa isi permita taxe mai mari (si atunci de ce sa le mai scada, cum mai indraznesc unii sa propuna) 2) chiar daca au plecat destule firme din romania se pare ca potentialul e destul de mare, asa ca nu are are rost sa ne ingrijoram din cauza celor plecati 3) daca tot cresc incasarile in ritmul asta, acum in an politic, poate reusim sa pastram si bugetarii ca sa ne voteze (asa ar putea suna strategia de lucru a partidelor) 4) daca lumea nu a iesit in strada, bancile nu au dat faliment niciuna, leul l-am tinut in corzi, si am reusit sa si continuam sa furam intre timp atunci ce rost mai are sa facem reforma daca merge si asa.
    E chiar o surpriza placuta acest grafic in cazul asta. Cel putin pentru mine. Inseamna ca se va trai in continuare bine in romania – cine poate, binenteles!

    1. @Ion
      Cred ca nu am fost destul de clar. S-au aplicat taxe mai mari la aceasi economie. Era normal sa creasca incasarile dar asta nu inseamna ca economia isi permite taxe mai mari. Inseamna doar ca cei care aveau contracte incheiate la 19% acum plateau 24%. Un alt semn ca economia nu-si permite taxe mai mari sunt deficitele acumulate din 2009, arieratele si dublarea datoriei publice.

      Pe termen scurt o crestere a impozitelor si taxelor duce la cresterea veniturilor pentru ca in economie exista contracte in derulare. Dar pe termen de 3, 4 ani taxele mai mari duc la scaderea economiei in cazul in care nu creste producctivitatea.

      Iar daca vrei cu adevarat sa te uiti la veniturile din economia reala o sa vezi ca cele din profit si venit (salariu) sunt constante sau in scadere.

  3. 3-4 ani? Pe cine inetreseaza in romania ce va fi peste 3-4 ani? Alegerile sunt peste 3-4 luni! Pina atunci trebuie sa fie bine ca sa fie voatati cei care trebuie sa fie votati.
    Iar daca economia a rezistat la cresterea de taxe asta inseamna ca e destul de rezilienta. Dpdv al cretinilor din conducerea romania taxele mai mari isi au rsotul lor si si-au facut treaba cu ele. Ca mai sunt unii economisti care spun ca e rau pentru economie si pentru viitor … e deja o poveste care oricum nu face audienta in massmedia!
    O zi buna

    1. @Ion
      Pe mine ma interseaza, ca economist. Nu fac politica. Economia nu a rezistat, fara aceste taxe am fi avut o crestere economica mai mare, mai multe locuri de munca etc. Iar aici e vorba de anul trecut nu de ce se va intampla peste 3-4ani.

      O zi si mai buna

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