December 7 (SeeNews) - Romania will target a budget deficit on cash basis equivalent to 2.8% of gross domestic product (GDP) in 2016, a draft of the country's fiscal blueprint indicated.
Under European standards, next year's budget deficit will be equivalent to 2.95% of GDP, up from 1.8% in 2015, the budget bill, unveiled by finance minister Anca Dragu late on Friday, showed.
According to the Medium Term Budgetary Objective (MTO) agreed at the end of 2014 with the International Monetary Fund (IMF) and the European Commission, Romania should have a deficit of around 1%-1.2% in 2014 and 2015. The governing programme announced last month by Romania's new prime minister, Dacian Ciolos, would seek a renegotiation of the MTO to set an easier to reach target.
Romania's budget revenues are seen up 1.6% to 231.1 billion lei ($56.1 billion/51.6 billion euro) next year while spending will climb by 6.7% to 252 billion lei.
There will be a rise in allocated budget funds next year for the defense ministry, followed by the interior ministry, the health ministry and the education ministry. The ministries of labour, of regional development and of environment will get less funding through the state budget in 2016.
Further measures envisaged in the 2016 budget are wage increases in the healthcare and the education systems, in certain public institutions and in the social assistance sector, Also, the budget foresees a 5% increase in pensions.
Wages will increase in 2016 by 6.6% net, but the minimum wage will not be increased starting in January as was planned and will remain at 1,050 lei per month.
The budget bill for 2016 will be debated in parliament this week.
The unveiling of Romania's budget for next year had a positive impact on the local financial markets, ING Bank Romania analysts said on Monday.
"The 2016 budget plan offered some positive news, mostly related to holding back on a minimum wage hike that would have further dented Romania’s external competitiveness," ING Bank Romania analysts said in a daily comment on the financial markets.
"In our view, the technocrat government reduces the risks of fiscal slippages ahead of late 2016 general elections. Consequently, we reduce our ESA budget deficit projection to -3.0% of GDP from -3.3% previously, but risks remain on the upside," the ING analysts added.
(1 euro = 4.4693 Romanian lei)