Monday, September 28, 2009

Romania 8-month budget gap at 4.5 pct/GDP

BUCHAREST, Sept 25 (Reuters) - Romania's consolidated budget deficit rose to 4.5 percent of gross domestic product in the first eight months of the year, as the economic contraction pummelled tax receipts, the finance ministry said on Friday.Earlier this month, ministry officials had said the preliminary 8-month figure was 4.4 percent of GDP.

From January-July, the shortfall widened by roughly one percentage point. Analysts have said the fast pace of expansion could place the centre-left government's end-year target at risk and potentially put downward pressure on the leu currency.

Romania plunged into recession at the start of the year as the global economic crisis slashed domestic consumption, weakened demand for Romanian goods at home and abroad, and dried up lending and foreign investment.To avoid a potential financing crisis, the European Union state turned to the International Monetary Fund for a 20 billion euros aid package. In return for aid, Romania must enforce deep cost-cutting reforms of its public administration.In nominal terms, the 8-month deficit reached 22.3 billion lei ($7.8 billion). During January-July, Romania's deficit reached 3.3 percent of a GDP estimated at 531.2 billion lei.

Since then, Romania revised its budget to reflect a deeper than forecast recession, lowering its GDP expectation to 497.3 billion lei and raising its end-year budget deficit target to 7.3 percent of GDP from 4.6 percent.Finance Minister Gheorghe Pogea said next year's deficit would be built on a gap of 5.9 percent of GDP, in line with IMF requirements.Ministry data showed budget revenues totalled 103.3 billion lei at the end of July, or 21 percent of GDP, a 6.6 percent year-on-year fall. Spending rose 8.3 percent on the year, reaching 125.6 billion lei, or 25.3 percent of GDP.Investment expenditure reached roughly 4 percent of GDP.On Friday, the leu currency hovered near five-week highs after it had gained gradually on the back of the IMF approval of a second loan tranche late on Monday.

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