Isarescu sees 2008 budget as prudent and recommends tight economic policies

Publish date: 14-11-2007
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BNR Governor, Mugur Isarescu, appreciates the 2008 budget as being prudent, without a big deficit, and asserts that economic policies must be strengthened in an electoral year, recommending the application of a mix of salary-budget-fiscal policies in order to regulate the macro-economic balances.

"The budget for 2008 is a relatively limited one. The BNR would like it more limited, but we are realist and know that the budget must provide a balance between income and expenses, but also between social aspirations and possibilities. We hope our address in the parliamentary commissions will attenuate the parliamentarians' tendency to increase expenses", declared Isarescu on Tuesday.

The BNR Governor was invited on Tuesday by the parliamentarians of the joint commissions for budget and finance in the Chamber of Deputies and Senate to attend the debates on the 2008 budget draft law.

Isarescu says fiscal policy must not relax, and he recommends for the regulation of the macro-economic policy the application of not only monetary policies, but also of a mix of salary-budget-fiscal policies. "The main vulnerability, at present and in perspective, is external deficit. The excessive use of the monetary policies as a regulatory instrument is very dangerous", said Isarescu.

The BNR Governor warned that salary increases exceed labour productivity, which, added to the appreciation of the exchange rate, leads to the accentuation of the external deficits. "The more salary incomes grow in nominal terms, the less they could be in real terms", said Isarescu.

Mugur Isarescu asserted that economic policies should be strengthened in prolonged electoral periods. " Romanian economy risks a correction from the market, as in 1999, given the international market conditions and the accentuated disbalances of the current account", explained Isarescu.

On 10 October, the Government approved the 2008 budget draft law, according to which the general consolidated budget revenues would amount to 172.8 billion lei, from 143.8 billion lei this year, while expenses will grow to 184.7 billion lei, from 154.5 billion lei, so that the budget deficit would be 11.9 billion lei, representing 2.7% of the GDP. The consolidate d budget revenues will mean the equivalent of 39.3% of the Gross Domestic Product (GDP), and expenses - 39.6% of the GDP.

Comparatively, the budgetary programme for 2007 set up the deficit to 2.8% of the GDP, incomes being 36.9% of the GDP, and expenses of 39.6% of the GDP.

The draft evaluates the 2008 GDP at 440 billion lei, while it would total 389.8 billion lei. The euro exchange rate, on whose basis the budget was calculated, is 3.18 lei. In 2007, the euro exchange rate was established at 3.35 lei in the budget.

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