Main targets included in the agreement with the International Monetary Fund (IMF), and international financial institutions (a four percent decline for the economy, and a 4.6 percent budget deficit) became official, replacing the initial forecasts of a 2.5 percent growth in gross domestic product (GDP) and a deficit of a mere two percent.
These first budget corrections, which come a mere two months after the government finalized the first draft budget based on 2.5 percent economic growth and a two percent deficit, cut sharply into ministry budgets, in order to comply with the 0.85 percent of GDP expense cuts imposed by the IMF. Businesspeople, employers associations, tax consultants, and economists interviewed by Business Standard said that a drop in revenues to the state budget is the main cause of this correction, and they forecast that several budget corrections will be effected this year, to meet the 4.6 percent deficit target imposed by IMF.
According to Ministry of Public Finance experts, quoted by NewsIn, the budget deficit is 1.54 percent of GDP in the first quarter of 2009, considering that budget revenues dropped seven percent.
“The important thing is not which ministries the money was taken from. What is important is where cuts were operated, whether from ministry investment expenditures or their capital expenses. And, even more important is what they will do with this money. Also, I believe that other budget corrections will take place this year, because they must comply with the budget deficit agreed upon with the IMF. It all depends on the evolution of revenues, and things are rather unpredictable at the moment,” Ionut Dumitru, Chief Economist of Raiffeisen Bank Romania, told Business Standard.
