Bucharest sees strong growth in Q1

BUCHAREST (Reuters) – Romania’s economic growth exceeded expectations in the first quarter, while the government budget recorded a surplus and revenues were on track, Finance and Economy Minister Varujan Vosganian said yesterday. He put first-quarter economic growth at 7.5 percent, compared with a market consensus of 6.4 percent and Vosganian’s earlier estimate of 7 percent. «GDP had growth of 7.5 percent in the first quarter, the biggest growth for Q1 since 1990,» Vosganian told a news conference. Vosganian said the minority government may also revise its annual growth forecast upward by as much as one percentage point from 6.5 percent, depending on harvest results. Vosganian’s comments contrasted sharply with foreign economists’ concerns that the fast-growing economy is overheating, with high domestic demand and resurgent inflation. First-quarter growth was propelled mainly by jumps in construction and consumption, but Vosganian said household savings, which rose 45 percent on the year, helped offset government concerns about domestic demand. Vosganian also said good export growth and a slowdown in imports in the first quarter boosted hopes that Romania’s current account deficit will be smaller as a percentage of GDP compared to last year’s roughly 14 percent shortfall. The vast gap, a key economic headache for the European Union newcomer which experienced years of high domestic consumption, was seen dropping to single digits by 2011, he said. Vosganian also said the government budget recorded a consolidated surplus of 0.14 percent of GDP in January-April. The cabinet targets a shortfall of 2.3 percent of GDP this year. Revenues worth 62.15 billion lei ($26 billion) accounted for 14.1 percent of GDP, versus around 9.8 percent in the same period of last year. Vosganian said Romania was on track to meet its revenue target of around 39 percent of GDP for this year, which includes the absorption of 2.5 billion euros in EU structural funds. Analysts said Vosganian’s comments were optimistic, saying the figures needed to be viewed in a wider context. ABN Amro analyst Catalina Constantinescu said the increase in first-quarter revenue partly reflected a base effect since tax collections in the same period last year were poor. Bucharest has been repeatedly criticized by international observers for unpredictable spending and insufficient transparency in its public finances. Analysts have said the government, which commands only 20 percent of seats in parliament and relies on the opposition to survive, has had loose fiscal and wage policies, leaving the task of curbing resurgent inflation solely with the central bank.