EnglishRomania"s budget deficit will reach some 3% of the GDP this year, thus exceeding the Parliament-approved budget, because of excessive increases in social security expenses in an electoral year, and also because of overestimated tax collection, an Unicredit report indicates. "It appears that the fiscal deficit, planned to be 2.7% of the GDP in 2008 or about 3.2% if calculated according to ESA95, is based on a very optimistic budget planning, which includes revenues of 39.3% of the GDP and a 6% economic growth. We believe the budget deficit will deepen to 3% of the GDP, or 3.3% if calculated according to ESA95," the report indicates.
The Unicredit analysts are concerned about the sustainability of the current level of social security spending, given that the Government has increased the minimum wage to 500 RON and pensions. A relaxed fiscal policy would be entirely inappropriate, considering that the current account deficit gained 66.1% last year to 14% of the GDP. Unicredit estimates further increase to 14.8% of the GDP in 2008.
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