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BRD : The reduction of the deficit in 2011, more difficult

The reduction of the budgetary deficit in the limit agreed with IMF and EC for this year, of 4.4% out of the GDP is a more difficult task to achieve than the deficit target of 2010, and the only solution is the better collection and the fight against evasion, the head-economist of BRD Florian Libocor says.

« I think it will be difficult this year from the view point of budgetary balance. If last year it was reduced with one percentage point, in 2011 we have to reduce it with two percentage points, which will be more difficult. The solution seems unrealistic for many, but I consider that it could be used, it means a better collection. If we continue to tolerate evasion we won't get anywhere. On the part of collection in Romania there could be made wonders » Libocor said, at a seminar organised by BRD in Baia Mare.

The budgetary deficit last year was 33.3 billion lei, 6.5% out of GDP, under the limit established in agreement with the IMF of 34.6 billion lei. For this year, the authorities propose to reduce th budgetary deficit to 4.4% out of the GDP ( 24 billion lei).

The head-economist of BRD considers that until it reaches a level of budgetary income of 35% of GDP, the government could not think of budgetary expenditure less restrictive. Last year, the budgetary income were 33% of GDP against 32% of 2009. « Until then, it is necessary the fiscal adjustment » Libocor said.

The BRD analysts consider the estimate regarding the inflation coming back as a descending trend, but they modified their prognosis for the end of the year, at 4.5% taking into consideration the pressures on the part of international prices for fuel and food

« With inflation of 4.5% with two basic effects, excises in January and VAT in July the desinflation will be greatly the result of a positive basic effect and less of the monetary policy. This effect will not help us in 2012 » Libocor said.

The head economist of BRD says that initial prognosis took into consideration that the price of oil should not affect the indices of domestic prices, but he saw that this market has a very high sensitivity.

According to Libocor, the inflationist pressures had an answer for the dilemma in the public debate regarding the opportunity of the national currency depreciation for the support of economic coming back after the central bank kept the exchange rate rather stable for the last two years against the evolution of the rate in the neighbouring countries.

« A depreciation of the currency would generate inflationist pressures. Anyway, the inflation prognosis was revised on the ascending trend, if we supplement with a depreciation it will be difficult to control inflation. We have to take into consideration the coordination which is not too perfect between the monetary policy and the fiscal one » the BRD official said.

In this context, Libocor considers as adequate the BNR decision not to modify the interest of monetary policy.

As regards the current account deficit, Libocor expects a level of 4-6% of GDP considered as moderate level, especially if in Romania cannot resume economic growth without a consistent advance of consumption.

« The export performed better, as we speak about average products, which correspond better to recession periods as Dacia. The export capacity reached a maximum, although we should invest in new production capacities » Libocor said.

In his turn Ariel Emirian, the deputy head economist responsible with emerging markets in Societe Generale, showed that despite the growth perspectives in Central and Eastern European countries, the coming back must be accompanied with expansion of domestic demand.

« This means that we need productivity gains, which means more investment. This form of economic growth will be the consistent one, with a foreign imbalance moderate enough, as big imbalances are not accepted. The productivity gain will be the key to the problem. It is not a matter of export only, but import substitutes as well » Ariel Emirian said.

The Societe Generale economist showed that, especially for Romania, the absorption of structural funds is a necessity and it is a challenge.

Emirian considers that monetary authorities in emerging countries will be confronted with a dilemma of currency appreciation or keeping under control inflation, taking into consideration the big flows of capital.

Sursa: http://www.actmedia.eu

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