Romania’s public debt drops below 35%-of-GDP at end-March

Romania’s public debt drops below 35%-of-GDP at end-March
By bne IntelliNews June 19, 2018

Romania’s public debt under the European Union’s ESA methodology stagnated in local currency terms during Q1 and hit RON301bn (€64.7bn) at the end of March, the finance ministry announced.

This came despite the significant RON4.45bn (€1bn, 0.5% of GDP) general government deficit in the quarter, indicating that a certain depletion of the government’s buffer took place. A similar development, namely softer borrowing compared to the budget financing needs, was noticed over the past year and it partly offsets the improvement in the indebtedness as shown by the debt-to-GDP ratio (that remains robust, though, despite the corrections for the depletion of government's buffer).

The recent improvement in the country’s headline ESA indebtedness ratio offset concerns related to imminent fiscal slippage and economic slowdown, but this might be misleading and could be reversed during the coming quarters.

The public debt dropped to 34.6% of GDP (latest four quarters’ GDP) at the end of March, down from 35% at the end of 2017 and 37.1% at the end of March 2017. The 2.5pp drop in the debt-to-GDP ratio over the past year was caused by the rise in the nominal GDP , but the softer borrowing compared to the budget deficit’s financing needs contributed as well. This must have evaporated a relevant part of finance ministry’s buffer. 

Versus March 2017, the country’s public debt edged up by a mere RON12.2bn (1.4% of GDP, half of last year’s budget deficit gap) but only by €1.16bn when including the exchange rate effects of the local currency’s weakening.

ESA Public Debt Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Mar-17 Dec-17 Mar-18
Debt RON mn 69,020 118,428 159,687 193,217 221,873 240,777 263,153 270,077 285,995 289,231 300,777 301,434
     - domestic 27,809 60,986 81,931 98,164 108,503 108,738 124,936 135,674 147,692 149,749 154,767 153,330
     - external 41,212 57,443 77,756 95,053 113,370 132,039 138,218 134,403 138,303 139,482 144,261 142,937
Debt € mn 17,319 28,009 37,268 44,729 50,099 53,689 58,712 59,692 62,979 63,552 64,549 64,719
Debt to GDP 13.2% 23.2% 29.9% 34.2% 37.3% 37.8% 39.4% 37.9% 37.5% 37.1% 35.0% 34.6%
Source: bne IntelliNews                        

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