Romanian Govt Counts On Recent Measures To Cut Budget Spending To 2.5% Of GDP

Romania’s government estimates its recent measures to freeze pensions, scrap several social facilities and defer some of its obligations will cut public spending by 13.5 billion lei (EUR1=RON4.2099), or 2.5% of GDP, and failure to adopt these measures would boost the budget deficit to 8.4% of GDP.

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The government last week decided, among others, to freeze pensions for labor categories I and II, postpone until 2011 the payment from the state budget of health insurance contributions for non-taxable pensions, ban meal, gift and vacation vouchers in 2010, extend the period of capping the salaries of state-owned companies' managers and board members, and reduce funds from the state budget assigned to scientific research.

The government said all these measures will save nearly RON13.5 billion to the state budget, which translates into nearly 2.5% of GDP, and that failure to adopt these measures would boost the country's budget deficit to 8.4% of GDP and further hinder the country's economic revival.

Romania's draft 2010 state budget considers economic growth of 1.3% of GDP and an inflation rate of 3.7%. In 2009, the Romanian economy is estimated to contract by around 7%, while the annual inflation is predicted at 4.5% end-December.

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