FRIEDRICH-EBERT-STIFTUNG IMPROVING SOCIAL PROTECTION IN ROMANIA 6 MACRO-ECONOMIC RELEVANCE OF INCLUSIVE SOCIAL PROTECTION SCHEMES – Case study Increasing the Social Reference Indicator(ISR) will result in a proportional increase of social assistance benefits calculated directly on the basis of this indicator(unemployment benefit, family support allowance, child care leave benefits, benefit for disabled persons, social aid for the guaranteed minimum income). Calculating on the basis of sums paid as social assistance benefits in 2019, increasing ISR from RON 500 to RON 1200 would mean an increase of social benefits to a tune of RON 10.4 billion or 0.99 percent of GDP(2019). Since raising ISR influences only 8.6% of the total social assistance payments, this would lead to a 9.1% increase in total spending for social assistance. Table 4 The impact of increasing ISR from RON 500 to RON 1200, based on 2019 budgets Unemployment benefit Family support allowance Child-care leave benefits Stimulant for early return to work from child care leave Social assistance benefits for the guaranteed minimum income Disability benefits Total Increasing As a% of GDP Total sum transferred in 2019 591 363 4,244 690 555 3,697 10,140 Sum of payments resulting from increasing RSI 1,419 871 6,433 1,657 1,332 8,872 20,584 10,444 0.99% Data source: National Agency for Payments and Social Inspection(Report regarding Main Social Assistance Benefits 2019), Ministry of Public Finance(Budgetary Execution 2019) To assess the macroeconomic impact, we have to take into account the consumption pattern of the Romanian population in general and of those persons who benefit from social assistance in particular. We will start with the premise that increasing ISR from RON 500 to RON 1200 would mean an increase of household incomes equivalent to 0.99 percent of GDP, as explained above. In theory, these supplementary resources will stimulate the demand for consumption, thus contributing to economic growth if this demand is met by domestic activity. 14 Calculated as the difference between GDP growth and final consumption growth, as a percentage of GDP growth. 15 Growth of imports of goods and services, as a percentage of GDP growth. 16 Growth of taxes on product, as a percentage of GDP growth. In the last three years, the Romanian economy saw a relative stabilisation of macroeconomic indicators, which eases the task of calculating the impact of a budgetary stimulus on the economy. At a national level, the marginal propensity to save (MPS)¹⁴ was 10.4% in the last three years, the marginal propensity to import(MPI)¹⁵ was 49.7%, and the marginal tax rate(MTR)¹⁶ 7.7%. In 2019, the values of the three indicators were 13%(MPS), 40.9%(MPI), and 8.7%(MTR). These structural indicators should allow one to calculate a multiplier representing the impact of increasing social assistance payments on the economy, but before undertaking this estimate we would like to make some observations. 16