Romanian Government Approves 2010 Draft Budget

The draft budget is essential to unblock new disbursements from a EUR20 billion multilateral loan package that were halted over political turmoil following the collapse of a centrist government in October.

Prime Minister Emil Boc, who Wednesday received parliamentary endorsement for a new Cabinet, said the draft budget envisages an economic growth of 1.3% in 2010, an annual inflation rate of 3.7% at end-year.

In 2009, Romanian economy is estimated to contract by around 7%, while the annual inflation is predicted at 4.5% end-December.

The draft budget is expected to pass parliament early January, Boc said.

"Romania will be a functioning state in 2010, with a stable, slightly growing economy and will be able to restart its economy in 2011 (…). I am confident that sometime during 2010 we will be able to make positive corrections, particularly regarding investment and development programs," said Finance Minister Sebastian Vladescu.

Next year's draft budget includes a series of austere, most unpopular measures in the public sector, such as slashing up to 100,000 staff and freezing wages and pensions, in a move to bring down the budget deficit to 5.9% of the gross domestic product, from 7.3% of GDP estimated for 2009.

The bill, however, maintains the flat tax on income unchanged at 16% and the value added tax at 19%, as well as the tax exemption on reinvested earnings.

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