ECONOMY

Romania boosts 2006 spending; deficit stable

BUCHAREST (Reuters) – Romania’s centrist government yesterday raised this year’s spending and nominal deficit plans but kept the deficit projection at 2.5 percent of gross domestic product (GDP) unchanged, Finance Minister Sebastian Vladescu said. It was the government’s fourth change in shortfall so far this year, following earlier increases in the target from an initial 0.5 percent of GDP, which analysts said showed a struggle to draft sustainable fiscal plans. «The revision follows a reassessment of macroeconomic indicators. The (nominal) GDP has been revised upward by 5,600 million lei,» Vladescu told a news conference after a cabinet meeting. Analysts widely expect the government will not reach its deficit ceiling by the end of the year as ministries will struggle to funnel cash into feasible projects. The budget was in surplus at the end of September so the government is thought unlikely to be able to spend sufficient money in the final quarter to produce a deficit of 2.5 percent of GDP. Only a modest full year deficit is expected. «The biggest surprise is the decision to maintain the deficit target as long the (nine-month) surplus is 1.7 percent… on the other hand the decision is a signal that the government will continue to relax its fiscal policy in the next years,» ING Bank chief economist Florin Citu said. The government plans a 2.8 percent/GDP budget deficit next year. Vladescu said budget execution in the first three quarters of this year showed higher-than-projected revenues and under-usage of some budgetary allotments. He said that government spending was raised by 1,098 million lei ($403.7 million), or around 0.33 percent of GDP, while revenues were upped by 987.8 million. Nominal GDP is estimated to reach 335.9 billion lei in 2006, Vladescu said, adding that this was the last budget revision of the year. He did not give a reason for higher GDP projections. The cabinet raised the deficit by around 110 million in nominal terms, making additional allotments mainly to the Transport, Labor and Interior ministries. Funds were also redistributed among ministries.