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Discussions with IMF for the 2012 budget start from GDP prognosis of 2.3-2.5%

Discussions which start this week with the mission of evaluating the stand-by agreement regarding the construction of the budget for 2012 start from the prognosis of economic growth of 2.3 – 2.5% and a budgetary deficit of 3% of GDP, target which is brought by the European Commission and less by IMF.

Governmental sources stated for Mediafax that the negotiations with IMF will aim at the level of the cash deficit, and in the case where the budgetary deficit calculated through the method ESA 95 ( which covrs the losses of the state companies as well) will be over the target of 3% of GDP, due to foreign causes, as well as the slowing down of European economies more difficult than expected, takes into consideration the chance that Romania requests derogation from the ECOFIN ministers' council.

The reduction of the budgetary deficit under 3% next year is assumed by the government in the agreement with IMF and the EU, being a condition for closure of the excessive deficit procedure started by the European Commission against Romania in 2009. 'We are working at this moment for the data regarding the income and expenditure for next year.The figures have not been established yet, there will be calculations while the IMF delegation is here' the sources said.

The initial draft was built on an economic growth of 4% in 2012, which corresponds to a GDP of 590 billion lei, according to the calculations of the National Commission for Prognosis. As a consequence, the budgetary deficit projected for next year would be 17.7 billion lei, dropping by 6.3 billion lei against the level programmed for this year.

President Traian Basescu stated, recently, that Romania would find it very difficult to support financially a budgetary deficit of 3% due to the high interests asked for when financing. The ministry of finances got loans of 41.34 billion lei and 1.401 billion euro, through bonds, money for financing the budgetary deficit. The ministry rejected from September to mid-October three bids out of ten for sales of bonds as they considered that the costs were too high. The bids programmed for October cover only bonds which get to maturity this month, almost 4 billion lei. Even if the finances accepted in August and September higher interests, the financing plan was not accomplished. The ministry got loans for 3.13 billion lei in September, under the programmed value of 4.7 billion lei.

Premier Emil Boc stated on Tuesday that the prognosis for economic growth which will build the budget draft for next year will be established by the government in October, following the consultations with IMF, the European Commission and the World Bank. At present, the official estimate for economic growth is 3.5- 4% but the figure is to be revised dropping during the mission of the three international institutions, to come to Bucharest on Tuesday 25 October.

According to the quoted sources, the National Commission for Prognosis insists that economic growth is likely for next year of over 2.5 % even 2.7 – 2.8% but the Romanian authorities want to coordinate their projections with those of the IMF, EC which are a bit pessimistic. 'In any case we won't accept estimates of some analysts, under 2%' the sources said.

The head of IMF mission to Romania Jeffrey Franks stated at the end of September, for Mediafax that IMF will revise at about 2% the economic growth prognosis for Romania for next year, the new projection being half against the present estimate, as the risks of foreign contagion have increased.

Later, BERD reduced the prognosis for next year, by 2.7 percentage points, at 1.1% while BCR, the biggest local bank has an estimate of 1.9% with a percentage point under the initial projection.

BRD –Groupe Societe Generale announced a downward revision by 0.7 of the prognosis for 2012, from 2.8% to 2.1% a little over what Jeffrey Franks announced three weeks before. The most optimistic prognosis comes from Raiffeisen Bank which modified their estimate for GDP from 3.5% to 2.7%.

The European Commission opened at the beginning of 2009 a procedure for budgetary deficit against Romania and recommended the authorities to act with a view to reducing the gap to under 3% of GDP by 2012, through measures for medium term. At mid last year, the government decided to increase VAT by five percentage points to 24% and reduced the salaries in the public sector by 25%. Following these measures, the European Commission decided not to follow he supplementary steps in the excessive deficit procedure in the case of Romania, appreciating that the state took the adequate measures and will reduce the budgetary deficit under the level of 3%by the limit date agreed as the end of 2012.

After the first eight months of the year, the general consolidated budget recorded a deficit of 12.97 billion lei, representing 2.4% of GDP and the Romanian authorities and the representatives of the IMF expect the budgetary deficit to be within the target agreed. The budget for this year, built on economic growth of 1.5% was revised at the beginning of August when the government surplanted through derogation from the fiscal responsibility law the budgets of several ministries both for the financing of the investment projects and for the payment of debts accumulated by the state companies.

A joint mission of IMF, the European Commission and the World Bank will be in Romania between 25October and 7 November for the third evaluation of the stand-by agreement, and the most important themes on the agenda aim at the construction of the budget for next year and the reform of the state companies. The authorities in Bucharest decided in March to prolong the agreement with the IMF through a stand-by agreement worth 3.09billion DST ( almost 3.5 billion euro). The agreement with IMF is accompanied with a stand-by support of 1.4 billion euro from the European Union and a loan of 400 million euro from the World Bank.

Sursa: http://www.actmedia.eu

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