EC estimates 7.5% deficit for Romania

Romania could register a budget deficit worth 7.5 percent of the Gross Domestic Product (GDP) this year, according to a prognosis released yesterday by the European Commission. The forecast is even grimmer for 2010, as the EC expects a wider deficit, up to 7.9 percent of the GDP. Last year, the consolidated budget deficit amounted to 5.2 percent according to European standards (ESA95), although, until the final months of 2008, it was expected to remain below the 3 percent threshold. Under these circumstances, the EC says, Romania needs massive loans, leading to a significant hike in the public debt, up to 21.1 percent of the GDP in 2009 and as much as 26.8 percent next year, compared to 15.2 percent in 2008. The figures come amid increasing concerns of the country’s macroeconomic situation. Most local and foreign analysts say that Romania should ask for a loan from the International Monetary Fund (IMF) or another international financial institution. “We need a financial assistance package, not from the IMF alone. We must also call on other institutions, such as the European Central Bank, the Bank for International Settlements, the European Investment Bank, European Commission, etc,” former Finance Minister Daniel Daianu said. “As we see, budget revenues will drop, the economic dynamic nears zero, there are discussions about salary hikes. This will widen the budget deficit,” he added. Current Finance Minister Gheoghe Pogea admitted that Romania could need an external loan. As for the deficit expected by the EC, some analysts say the forecast is too gloomy. “It is not possible that we have a 7.5 percent budget deficit, as the EC estimated. First of all, that could not be financed, we would have difficulties in getting a loan. Although the public debt is rather low, we have a huge private debt. And Romania was downgraded by rating agencies for this reason,” analyst Ilie Serbanescu told Business Standard. (B.A.)