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| PROSPECTS FOR A CRISIS YEAR 21/01/2009 |
| (2009-01-21) |
| Last updated: 2009-01-22 11:37 EET |
The draft budget, that the new government will submit to parliament for approval, is based on a 2.5% growth rate of the GDP and a 2 % public deficit. However the figures were contradicted on Monday by the European Commission, whose forecast is far more pessimistic: the economic growth rate will not exceed 1.75% in 2009 and the public deficit will stand at 7.5%.
The government says Brussels has made the calculations based on the figures provided by the former cabinet. Romania’s President Traian Basescu has however warned that Romania’s budget deficit in 2009, as forecast by the European Commission, will be confirmed by reality if all laws adopted in 2008 are enforced and all financial requests made by the ministers of the new cabinet are met. Traian Basescu:
"The difference (between the deficit estimated by Romanian experts) and the 7.5% budget deficit, accurately estimated by the EU based on the existing laws, is indicative of the tremendous effort that the government should make, by curbing budget expenditures in order to reach the envisaged target. Both sides that presented the figures are right, both the government, that made public its intention to build a budget based on a 2% deficit, and the EU, that made calculations based on the existing laws in Romania and which, if enforced, would generate this catastrophic deficit and push Romania into a deep crisis, by creating macro-economic imbalances which might never be controlled.”
Analysts and business people express concern about the economic stagnation and the prospect of going into recession. The depreciation of the leu to new records, the fall in exports and the increase in the unemployment rate, have also sparked fears. The national currency has lost 10% against the Euro since the start of the year, reaching an all-time low, with the Euro being traded for 4.3 lei. The government estimates that the number of layoffs will increase from over 400 thousand people in December to some 505 thousand in late 2009.
The vice-president of the National Trade Union Bloc, Matei Bratianu claims the figures are underestimated. He expects the number of the jobless to reach one million, as many migrants are expected to return to Romania this year, because of the financial crisis that affects Western countries. Bratianu also estimates that emerging social tensions might affect both the public and private sectors. In another move, Finance Minister Gheorghe Pogea has held talks with EU Commissioner for Economic and Monetary Policy, Joaquin Almunia, on the priorities of the Romanian government, which intends to consolidate the budget by restructuring expenditures and ensuring macro-economic stability.
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