Friday, January 16, 2009

Romania government plans stimulus package for SMEs

BUCHAREST, Jan 15 (Reuters) - Romania's centre-left government plans to boost financing of small and medium-sized firms by 25 times on the year to around 0.5 percent of gross domestic product in the 2009 budget, to aid faltering growth.

Gradually spilling into the emerging economies in the region, the global credit crunch and falling euro zone demand have so far hindered exports, boosting unemployment and dampening domestic demand by slowing bank lending.

Economists and officials forecast Romania's economy will slow down sharply to around 3 percent this year from a hefty 8-9 percent in 2008.

'We aim to stimulate 15-20,000 small and medium firms ... So far Romania offered support to mammoth state firms, we want to support private enterprises to ensure healthy economic growth,' SMEs minister Constantin Nita told reporters.

Some of the countries in the region have already endorsed plans to offer some incentives to small firms to help them better cope with the crisis.

In Romania, the region's second biggest country by population after Poland, inflation fell to 6.3 percent in December, bolstering the case for a cut in interest rates next month to support the slowing economy.

Nita, who expects 'thousands of very small firms to collapse' this year because of their inability to overcome the crisis, said the government plans to offer interest rates subventions for development loans.

The subsidised ceiling could go to up to 50 percent of the interest rate, he added.

A special fund to guarantee firms' credits with a share capital of 100 million euros will be also set up, along with the introduction of a fixed tax replacing the 16 percent profit tax for very small services firms.

(Reporting by Radu Marinas; Editing by Victoria Main) Keywords: ROMANIA BUDGET/FIRMS

(radu.marinas@reuters.com ; +40 21 315 8320; Reuters Messaging: radu.marinas.reuters.com@reuters.net )

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