The government’s target for increasing budget revenues to 39.3 percent of the Gross Domestic Product (GDP) is unrealistic and a 33.5 percent of the GDP target is in reach, Moody’s senior economist Kenneth Orchard told NewsIn.
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The official noted an annual growth exceeding 2 percentage points of share held by revenues in the GDP is hard to accomplish for any government. Last year, budget revenues amounted to 31.4 percent of the GDP. However, the government had aimed at 36.9 percent of the GDP. It targets this year a budget deficit of 2.7 percent of the GDP according to Romanian standards and of 3.2 percent according to the European System of Accounts (ESA 95).
Economy and Finance Minister Varujan Vosganian stressed aim to narrow the budget deficit to 2 percent of the GDP. He said a plan was submitted to the Cabinet for cutting budget expenditures by 1.1 billion euros, this year.
Moody’s analyst expressed similar views with Romanian analysts who have voiced skepticism over the government’s budget plans for this year. They said budget revenues are overrated and expenditures cannot be cut dramatically in an electoral year.
The 2008 budget proposed by the government and approved by the Parliament has nothing to do with the economic reality, Raiffeisen analysts said at the end of February.
Orchard recommended the Cabinet to adopt multiannual budget planning, an idea taken into account by the Ministry of Economy and Finance (MEF) according to Vosganian. Multiannual budget planning had positive effects in many countries and in Romania there are conditions to base such evolution upon considering political turmoil, Orchard noted.
The Moody’s analyst also noted the government should adopt smart solutions to develop the country’s poorer areas, instead of making budget plans for each ministry.
On the long run, Orchard says a speed up of structural reforms is essential to break open lock to the Eurozone door in 2014, considering the central bank succeeds in curbing inflation and the economy grows fast.
The Central Bank of Romania (BNR) emphasized several times the need for structural reforms and harsher fiscal policies since inflation kept exceeding by far the set targets.
BNR revised upwards the inflation prognosis for the end of the year from 5.9 percent to 6 percent, as it set a 3.8 percent (+/- 1 percentage point) for December 2008. For 2009, the bank announced an inflation target of 3.5 percent.
NewsIn
