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EC Sees Romania’s ‘09 Budget Def At 5.1% Of GDP Vs 7.5% Of GDP In Previous F’cast

The European Commission revised down its forecast on Romania’s budget deficit in 2009, at 5.1% of the gross domestic product, from previously seen 7.5% of GDP, according to the Commission's economic spring forecast released Monday.
EC Sees Romania’s ‘09 Budget Def At 5.1% Of GDP Vs 7.5% Of GDP In Previous F'cast
04 mai 2009, 13:54, English

Also, the budget deficit is equally projected to narrow to 5.6% of GDP in 2010, from previously seen 7.9% of GDP in January prognosis.

"The 2009 budget adopted in February contains several measures to lower the deficit, including a recruitment freeze and the reduction of various bonuses in the public sector, cuts in expenditure for goods and services and subsidies, limiting pension increases to inflation, a 3.3 pps rise in the pension contribution rate and a bringing forward of the schedule to increase excise taxes," according to the EC report.

The Commission also said the budget deficit of 5.4% of GDP in 2008 was mainly due to substantially higher-than-planned current spending, notably in public wages and social transfers.

"In addition, overly optimistic revenue projections did not materialise and a sudden drop in revenue collection in the last two months of the year owing to the economic slowdown added to the worse-than-expected outcome," the report added.

Romania agreed end-March with the IMF, the European Union and other international institutions a EUR19.95 billion financial package, supported by a EUR12.95 billion IMF loan under a two-year standby arrangement.

The agreement between Romania and the IMF fixes quarterly performance criteria on Romania’s budget deficit, which was agreed at RON24.36 billion, or 4.6% of the GDP for the whole of 2009.

Romania’s consolidated budget deficit was at 7.925 billion lei (EUR1= RON4.1835), or 1.5% of the GDP, after the first quarter, lower than the maximum ceiling of RON8.3 billion agreed with the International Monetary Fund.