2012年-世界发展银行全球_The_Challenges_to_Long_Run_Fiscal_Sustainability_in_Romania_34页_1mb

Summary of "The Challenges to Long Run Fiscal Sustainability in Romania"

Core Content

This working paper analyzes the long-term fiscal sustainability challenges facing Romania, focusing on the structural fiscal deficits, public debt levels, quasi-fiscal deficits of state-owned enterprises (SOEs), and the impact of demographic changes. The authors emphasize the importance of fiscal sustainability for macroeconomic stability and the state's ability to provide public services, noting that Romania's fiscal position has been significantly affected by the global financial crisis and demographic aging.

Main Views

• Fiscal Deficits and Debt: Romania's fiscal deficits and public debt levels have been affected by the global financial crisis. The structural fiscal deficit was 8.5% of GDP in 2008, and the government implemented a significant fiscal consolidation, reducing it to 2.8% of GDP in 2011. The gross public debt increased from 13.6% of GDP in 2008 to 34.5% in 2011, but is projected to decline to 28.5% by 2016.

• Debt Characteristics: The share of multilateral debt in Romania's public debt portfolio increased from 20.4% in 2008 to 28.8% in 2010, reflecting increased borrowing from international institutions. The average remaining maturity of public debt rose from 3 years in 2008 to 4 years in 2010. However, the shift to domestic and international markets may increase interest rates in the long run.

• Quasi-Fiscal Deficits (QFDs): SOEs contribute to fiscal sustainability challenges through QFDs, which are deficits incurred off-budget. The SOE sector, particularly in energy, transport, and mining, has been incurring losses since 2007. These losses, along with arrears to suppliers and social insurance funds, represent a significant fiscal burden. About 30 SOEs are expected to be included in general government data in 2011, worsening the fiscal balance by approximately 0.5% of GDP.

• Demographic Challenges: Romania's aging population poses a major threat to long-term fiscal sustainability. The population is projected to decline by 20% between 2008 and 2060, with the working-age population shrinking by 35%. The old age dependency ratio is expected to rise from 20% to 65% by 2060, significantly increasing the burden on the pension system.

• Pension System: The state pension system has deteriorated due to a shrinking workforce and an increasing number of pensioners. The dependency ratio in the pension system fell from 3.43 in 1990 to 0.89 in 2010. Romania has implemented reforms, including raising the retirement age, reforming the benefit formula, and introducing a multi-pillar pension system. However, the current contribution rates (over 44% of salaries) are a disincentive to formal employment.

• Tax System: Romania's tax system is inefficient due to widespread tax evasion and weak tax policy. The tax effort, measured by the share of tax revenue in GDP, is relatively low. Improving tax administration and reducing evasion could significantly enhance fiscal sustainability.

• Political Considerations: Fiscal sustainability is not only a technical issue but also a political one. Austerity measures and tax increases may not be politically sustainable once the immediate crisis passes. The upcoming elections in 2012 and 2014 will be critical in assessing public support for fiscal consolidation.

Key Information

• Fiscal Deficit Trends:

  • 2008: -8.5% of GDP (structural)
  • 2009: -7.0% of GDP (structural)
  • 2010: -5.1% of GDP (structural)
  • 2011: -2.8% of GDP (structural)

• Public Debt Trends:

  • 2008: 13.6% of GDP
  • 2009: 23.9% of GDP
  • 2010: 31.7% of GDP
  • 2011: 34.5% of GDP
  • Projected 2016: 28.5% of GDP

• Debt Characteristics:

  • Share of multilateral debt increased from 20.4% to 28.8% between 2008 and 2010.
  • Share of foreign currency denominated debt rose from 40% to 55% in the same period.
  • Average remaining maturity of public debt increased from 3 years to 4 years.

• Quasi-Fiscal Deficits (QFDs):

  • SOEs in energy, transport, and mining sectors have been incurring losses since 2007.
  • Total SOE arrears amounted to 4.8% of GDP in 2010.
  • Around 30 SOEs are likely to be included in general government data in 2011, worsening the fiscal balance by about 0.5% of GDP.

• Demographic Trends:

  • Population is expected to decline by 20% between 2008 and 2060.
  • Old age dependency ratio is projected to rise from 20% to 65% by 2060.
  • Labor force participation rate and formal employment have declined, increasing the fiscal burden on the pension system.

• Pension System Reforms:

  • Retirement age increased by 5 years.
  • Multi-pillar system introduced in 2008, including a mandatory defined contribution second pillar and a voluntary third pillar.
  • Contribution rates for pensions, unemployment, and health insurance are over 44% of salaries.

• Tax Effort:

  • Tax revenue as a share of GDP is relatively low due to tax evasion and weak policy.
  • Improvements in tax administration could enhance fiscal sustainability.

• Euro Adoption:

  • Romania's planned adoption of the Euro in 2015 will convert domestic currency debt to foreign currency, potentially affecting borrowing costs and exchange rate risks.

• Fiscal Sustainability Risks:

  • Risks include QFDs from SOEs and long-term demographic changes.
  • Market perceptions of fiscal sustainability could lead to early fiscal crises.

Conclusion

While Romania's current fiscal position and public debt levels are not immediately alarming, the long-term sustainability of its finances is under threat due to aging populations, inefficient tax systems, and the fiscal burden of SOEs. The paper underscores the need for structural reforms, including tax system improvements and pension system adjustments, to ensure long-term fiscal sustainability. Political support for these measures is crucial, especially given the potential for public resistance to austerity and tax increases.