Tuesday, February 10, 2009

Romania budget revenues down 8.7 pct y/y in Jan

BUCHAREST, Feb 10 (Reuters) - Romania's budget revenues fell 8.7 percent on the year in January, as tax receipts showed signs of suffering from cuts in jobs and output, casting new doubts over the government's budget targets.

Romania's centre-left cabinet has pledged to keep a tight grip on spending and cut the budget deficit to 2 percent of GDP, after lavish social spending by the previous government upped it to more than 5 percent of GDP at the end of 2008.

Finance ministry data showed revenues, which are unconsolidated and cover the budget's main components, fell to 13.82 billion lei ($4.2 billion) in January, or 2.4 percent of the government's gross domestic product forecast for this year.

The centre-left coalition government of Prime Minister Emil Boc targets revenues of 33.5 percent of GDP this year, or 193.8 billion lei, up from the 32 percent collected in 2008.

But analysts say the revenue target is unrealistic due a sharp economic slowdown.

"Given the high chances that the economy will continue to contract -- at least in the first half of 2009 -- revenue from value added tax and wages will diminish even more," said ING Bank Romania senior economist Nicolaie Alexandru-Chidesciuc.

"(This) will put even bigger pressure on the budget deficit and raise funding needs."

Ministry data showed revenue from the tax on profits fell roughly 31 percent on the year in January to 1.2 billion lei, while value added tax collections fell 8 percent to 4.3 billion lei. Receipts from tax on income rose 19.4 percent.

Economic pain is increasingly visible as thousands of workers are laid off and major manufacturers such as ArcelorMittal announce repeated work stoppages.

The cabinet says the economy will grow 2.5 percent this year, from around 8 percent in 2008. But the International Monetary Fund said it could slide into recession as persistent imbalances and slow reforms have left it ill-prepared.

Since the global credit squeeze picked up, concern has grown that Romania is more vulnerable to an economic downturn than some of its peers because of a vast external shortfall, high rates of hard currency borrowing and loose fiscal plans.

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