Tuesday, June 29, 2010

Romania fiscal deficit widens in Jan-May

BUCHAREST, June 28 (Reuters) - Romania's budget deficit for the first five months of 2010 widened to 3.1 percent of gross domestic product at the end of May from 2.2 percent in January-April as spending rose while revenues dipped, finance ministry data showed on Monday. 

Bucharest has promised to slash the fiscal gap for the whole of 2010 to 6.8 percent of GDP under a vital, 20 billion euro International Monetary Fund-led rescue deal, needed to prop up markets' confidence in the European Union's second-poorest member.

Analysts say the five-month performance could lower the chances of it meeting the target unless planned austerity measures, including a 25 percent cut in public wages, are implemented.

"If we look at the pattern in recent years, 3.1 percent is huge for five months. This clearly indicates that the radical measures would need to be implemented over the next six months," said Ionut Dumitru of Raiffeisen Bank in Bucharest.

Finance Ministry data showed the gap reached 16.7 billion lei ($4.76 billion) in January-May as spending rose 5.7 percent on the year in nominal terms while revenues fell 1.6 percent.
Romania's top court on Friday rejected parts of an austerity package related to pension cuts on Friday in a ruling that markets worried would endanger the IMF-led bailout.

The centrist coalition government responded by saying it plans to raise value added tax by 5 percentage points to 24 percent on July 1 and said at the weekend the IMF Board would discuss its euros aid deal on June 30 and release aid by July 2.

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