REPORTERNET.COM

Recession-hit Romania is to formulate its 2012 budget on the basis of a deficit of 1.9 per cent and of GDP growth of between 1.7 and 2.7 per cent, according to officials.

"The draft budget is based on a 1.9 per cent deficit, but it could go up to 2.5 per cent of GDP, depending on developments in the EU, and would hit 3.0 per cent product if it included state-owned enterprises' arrears, as Brussels insists", President Traian Basescu said after meeting a joint mission of the IMF and the European Union late last week.

Previously, Romania and the International Monetary Fund agreed on a deficit target of 4.4 per cent of GDP in 2011 and around 3 per cent of GDP in 2012.

Prime Minister Emil Boc said the government would soon unveil a "bad weather" budget for 2012 and reconfirmed the deficit will be lower than the targeted 3 per cent of GDP.

Boc had said previously this month that the prognosis for economic growth in 2012 was negatively affected by turbulence and uncertainties on European markets.

No more details about next year budget were revealed yet but, according to officials, in 2012 the government will not reduce public spending on pensions and wages.

Last July the government cut civil servants' wages by 25 per cent, while thousands of state jobs were axed and VAT was increased by 5 per cent to 24 per cent.

The government says it has no other option to keep the economy afloat but to keep its commitments to the IMF, the EU and the World Bank. Critics have said that while other European countries are trying to find alternative sources to cover their deficits, Romania was relying exclusively on IMF help.

In May 2009, crisis-hit Romania obtained a two-year 20 billion euro emergency loan from the IMF, the EU and the World Bank in exchange for implementing key reforms aimed at reducing public spending.

(source: Balkan Insight)