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EC Sees Romania’s ’09 Budget Def Widening At 7.5% Of GDP, From 5.25% In ’08 – 2

The European Commission, or EC, forecasts Romania's budget deficit to reach 7.5% of the gross domestic product in 2009, wider than 5.25% in 2008, due to an unfunded increase in pension benefits and the full impact of the 2008 cuts in the social security contribution rate.
EC Sees Romania's '09 Budget Def Widening At 7.5% Of GDP, From 5.25% In '08 - 2
19 ian. 2009, 13:47, English

“This reflects an unfunded increase in pension benefits and the full impact of the 2008 cuts in the social security contribution rate as well as the cost related to the second pension pillar. Public sector wage increases are assumed to remain high,” EC’s winter prognosis said Monday.

According to the Commission, tax revenues will be affected by the economic slowdown as well as various tax changes, such as removal of taxes on certain capital and interest gains, preferential tax treatment for R&D expenditure, reduced VAT for social housing.

The new government’s announced, but not yet approved, revision of the 2009 budget is not included in the forecast, EC said.

Moreover, the commission sees the public deficit to increase further to around 8% in 2010.

In November, the European Commission estimated Romania’s budget deficit to reach 3.5% of GDP in 2008, and to further widen to 4% in 2009.

Romanian budget draft for 2009 will be based on a budget deficit of 2% of the GDP, Romania’s Prime Minister Emil Boc said Friday. The authorities also said that the deficit could surpass the 2% threshold, but only for investment-related spending, not for consumption.