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| BUDGET PROSPECTS FOR 2008 (26.07.2007) |
| (2007-07-26) |
| Last updated: 2007-07-27 13:50 EET |
Referring to the new draft budget, Minister Vosganian said:
“This is the first budget to have been drafted at European standards. It is for the first time since 1990, that expenditures exceed 40% of the GDP. Our estimates show that in 2008, expenditures will reach 41.7% of the GDP and the income level will stand at 39%, which point to a deficit of 2.7 %. When forecasting the income level, we have taken into consideration the 3 billion Euros worth of European Funds to be absorbed by Romania, which account for 2.68% of the GDP.”
The draft budget also takes into consideration the economic growth rate and the level of incomes. The minister underlined that budget priorities in 2008 will be education, due to receive 6% of the GDP ( for the first time since 1990) and the public heath-care system, which will get 4.5 % of the GDP, a 0.5% rise as compared to 2007. Larger amounts of money will be allotted to transportation, regional development, infrastructure and agriculture. The welfare budget will also benefit from a spectacular rise. It will stand at 31 billion lei.
The 9 billion lei increase will be used to increase pensions, under a law recently promulgated by President Basescu, a law which has sparked heated debates among economists, politicians and civil society. They voiced reserve concerning funding resources, but the government gave assurances the rises will not affect the investment programmes. In another development, the contribution to Welfare will be reduced by 6 percent in three stages, to benefit both the employer and the employee.
However, the government’s optimistic provisions haven’t been shared by economic analysts cautioning on the risks that the budget objectives might not be met.
Here is Liviu Voinea, President of the Group for Applied Economy.
“There are risks concerning two main aspects. While doing the first calculations they failed to take into consideration all sorts of expenditures, which might appear next year, the more so as 2008 is also an election year. For instance, we should mention the expenditures meant to fit the Romanian armed forces with the necessary equipment, and a series of pay-rises. On the other hand ,we should also mention that the Finance Ministry has drafted the budget starting from the assumption that Romania will absorb some 3 billion Euros worth of European Funds, which is a considerable amount of money. If we cannot attract such larger amounts but- let’s say -10% less, the budget deficit will exceed 3% of the GDP, the EU accepted limit.”
It seems the forecast made by the Romanian authorities concerning the budget deficit do not coincide with those made by the European Commission. For 2007, Bucharest has envisaged a threshold of 2.8 % of the GDP at the most, while Brussels estimates it will stand at 3.2%, if measures aren’t taken. Only time will tell.
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