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The Parliament has adopted the state budget for 2011

The state budget is a top requirement of the IMF and should enable the disbursement of EUR 900mn to the NBR after the IMF Board meeting scheduled on January 7. It is built around a positive economic growth of 1.5%, a deficit of 4.4% of GDP (cash standards) and an average EURRON FX rate of 4.21.

Fiscal consolidation efforts will continue but no other significant tax hikes or expenditure cuts are planned next year, as the measures already implemented in July 2010 seem to be enough. After a 25% cut in the summer, public wages will increase by 15% in line with additional layoffs in the public sector. Social contributions could be cut in 2H11 if the economy recovers.

The budget received 207 votes in favour and 143 against. The opposition parties are decided now to challenge it in the Constitutional Court but we think that their political strategy has little chance to succeed.

Talks for a precautionary stand-by arrangement with the IMF will take place in January-February next year. Sources cited in the media said the new arrangement could be worth EUR 5-6bn, but at the same time a total value of up to EUR 8bn is not ruled out.

Investor implications: The continuation of the fiscal reforms within a new agreement with the IMF is supportive for the RON and government bonds. Yesterday, the deputy finance minister said Romania will be ready to issue euro mid-term notes at the end of January and could tap global markets twice a year.

Sursa: http://www.bcr.ro

Tags: budget euro

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