Foreign analysts: Government is overly optimistic

Publish date: 03-02-2009
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International analysts consider the government's budget deficit target for 2009 to be overly optimistic. The government, headed by Prime Minister Emil Boc, estimated a deficit target of two percent of gross domestic product (GDP). To be more precise, the general consolidated budget is based on a forecast of 2.5 percent economic growth, a 5 percent inflation rate, and GDP worth RON 579 billion (€144.7 bln).

Most international financial consultants feel that things are worsening in Romania, mostly because of political and economic uncertainty related to this year's budget. This deterioration will be reflected in forecasts by international institutions. An analyst in the Moody's rating agency, Kenneth Orchard, told Business Standard that the agency is preparing to revise the data regarding this year's GDP. Orchard had forecast a 0.3 percent drop in Romania's economy a few weeks ago, but this data will probably be revised to 0.5 percent, or even less.

"The government has set an extremely optimistic deficit target. A two percent budget deficit will be very difficult to achieve. In case things get out of control, if we see the government loses control over budget spending, if the deficit widens to seven percent or nine percent, then we could expect a downgrading of forecasts and, probably, of rating. For the time being however, we are not considering modifying the rating perspective or Romania's rating," Orchard told Business Standard.

The Head of the Emerging Markets Analysis Department of the National Bank of Greece, Michael Loufir, underlines the government's extreme optimism. "We estimate a 2008 budget deficit of 5.2 percent of gross domestic product. Referring to the set budget deficit target in the current draft budget, we consider this to be difficult, if not impossible to meet," Loufir said.

Business Standard

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