Romania's Fin Min Plans Multi-Annual Budgets To Boost Predictability

Analysts have said Romania should think bigger in terms of macroeconomic planning to increase the predictability of its development and become more credible to foreign investors.

"We [...] intend to make progress in terms of predictability through a multi-annual financial programming," Pogea said in a statement issued late on Monday following the release of the European Commission's macroeconomic projections for the EU member states.

The EU executive on Monday cut its forecast for the economic growth of Romania in 2009, yet the country remains one of the few EU members with positive economic growth projected for this year.

"The spending dynamics and the pro-cyclical, expansionist fiscal-budgetary policy of the former government have brought Romania a budget deficit of 5.2% of GDP [gross domestic product] in a year [2008] with 7.9% economic growth," Pogea said. "In our budget projection we have decided to adjust the public deficit and the current account gap to sustainable levels".

Gheorghe Pogea will discuss Romania's budget framework with EU Commissioner for Economic and Monetary Affairs Joaquin Almunia on Tuesday in Brussels.

The European Commission has projected economic growth of a real 1.8% for Romania this year against the government's projection of 2.5%. The Commission has also forecast a budget deficit equivalent to 7.5% of GDP for Romania, far above the government's projection of 2.0%.

Romania's government has set an inflation target of 4.5% for this year against 5.7% forecast by the Commission. The country expects the number of unemployed to grow to some 505,000 from 403,400 at the end of 2008 and aims at a 5.8% growth in average gross salary to 1,693 lei ($510/393 euro).

The estimates of the government are based on an average exchange rate of 4.0 Romanian lei per euro. It plans to submit its 2009 budget draft to parliament by the end of the month.

(1 euro = 4.3062 Romanian lei)