Wednesday, February 11, 2009

Romania's public debt up to 21 pct/GDP in 2008

BUCHAREST, Feb 11 (Reuters) - Romania's total public debt rose by 32.3 percent on the year in 2008 to 108.86 billion lei ($32.91 billion), or roughly 21 percent of gross domestic product, finance ministry data showed on Wednesday.

Many economists say Romania may be next to seek financial aid from an international institution, following several of its eastern European peers.

The risks stem from the private sector, where banks have been lending heavily in recent years, particularly in hard currency, raising doubts over Romania's ability to continue funding its gaping external shortfall.

Romania which plans to join the euro in 2014, has one of the lowest ratios of public debt to GDP in eastern Europe.

In 2008, around 60 percent of Romania's public debt was taken out in the local leu currency, and just under 28 percent in euros, ministry data showed.

The centre-left government targets a budget shortfall of 2 percent of gross domestic product this year, which analysts say may be unrealistic as high social spending by the previous government pushed last year's budget deficit to over 5 percent of GDP, significantly above the EU ceiling.

This exacerbates threats posed by Romania's vast current account deficit, which economists say makes the EU state one of the most vulnerable emerging economies in eastern Europe. Already two ratings agencies grade Romania's debt as 'junk'.

No comments: