Romanian Bugdet Def Seen At 3.9% Of GDP In ’08, 5.8% Of GDP In ‘09 – Sources

In ESA standards, used by the European Commission, Romania’s budget deficit will reach 4.8% of the GDP in 2008 and 6%-6.2% of the GDP in 2009.

“The Finance Ministry worked out a note upon the effects of the crisis on the budget receipts and the last predictions regarding budget revenues in 2009. There will be under great pressure, as Romania’s access to eurobond financing is excluded by the end of the year and also in 2009, and the local market’s liquidity is restrained,” the source said, citing the Finance Ministry’s note.

The high difference between the budget deficit estimated in Romanian terms and the one estimated according to ESA standards comes from a higher than forecasted impact of the damages offered by the Fondul Proprietatea, the investment fund set up in December 2005 to compensate Romanians whose properties were confiscated during the communist regime

For 2009, the budget deficit forecast takes into account the salary and pension hikes, together with a drastic cut in programmed revenues, by around 2% of the GDP, although some savings at subventions and material spending are also considered.

According to the quoted source, Romanian is close to the crowding out limit, mainly as most of the privatization resources were consumed.

The budget needs 8.5-9 billion lei (EUR1=RON3.9372) in December, the source said.

Ministry specialists recommend a revision of the macroeconomic forecasts for 2009 and a cut in estimated budget revenues by RON10-11 billion, together with a larger cut, of RON20 billion, in budget expenditure.

In the same time, the ministry representatives do not recommend tax increases for the moment, as payment delays are already booming.

Romania’s consolidated budget deficit widened after the first ten months to 1.61% of the gross domestic product, or GDP, Finance Ministry data showed last Wednesday.

But the Finance Minister Varujan Vosganian said recently the country’s budget deficit widened to 2.9% of the GDP after the first 11 months, due to a slump in budget revenues in the last two months, following the international crisis. He said the budget revenues in October and November were EUR1.3 billion below the projected level.

The European Commission forecasts Romania’s budget deficit at 3.5% of the GDP in 2008 and at 4% of the GDP in 2009.