Tuesday, July 14, 2009

Romania minister says higher budget deficit needed

BUCHAREST, July 13 (Reuters) - Romania needs a wider budget deficit to finance badly-needed infrastructure investment this year while its economy undergoes deeper than forecast recession, a centre-left coalition cabinet minister said on Monday. "There would be need for a wider deficit, with (additional) spending routed to infrastructure works," Constantin Nita, minister in charge with overseeing the small -and medium sized enterprises, told Reuters in a brief phone interview.

Since it secured a 20 billion euro foreign aid package led by the IMF to shield its economy from global crisis, Romania has stayed on course with budget plans as agreed with a group of lenders that also includes the European Union.

But first-quarter data showed a deeper than expected recession at 6.2 percent on the year and a senior central banker said this week the second-quarter contraction could be "significant".
Mircea Geoana, leader of the ruling coalition's Social Democrat Party, said earlier this month, the government may raise this year's deficit target, backed now by the IMF, if the economic situation worsens.

Nita said the ruling coalition had yet to hold talks on the desired level for this year's budget shortfall, which has been set at 4.6 percent of gross domestic product under the terms of the IMF-led deal Romania secured in March.

The official said he hoped this year's recession would not be deeper than 6 percent, compared to an original IMF forecast of around 4 percent contraction.

"I hope contraction will not be bigger than 6 percent ... I see it somewhere 5 percent, which would not be too bad given (the scale) of the global crisis."

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