The budget rectification sets exchange rate at RON 4.3 / Euro 1

The exchange rate on which the 2009 budget was drafted has been rectified to RON 4.3/€1 from RON 4/€1, a level in line with the trend of the national currency in the first quarter of 2009, when the average value was RON 4.26/€1, according to an announcement yesterday by Minister of Finance Gheorghe Pogea, in his first conference at the ministry's headquarters.

The first two months of this year have already brought a massive budget rectification, of 75 percent of the current account deficit, on the heels of an improved trade balance and record foreign direct investments (FDI), worth €1.37 billion. Thus, FDIs surged 38 percent in January-February 2009, due to capitalization of subsidiaries by foreign mother groups, due to the lending deadlock.

Regarding the minimum tax, Pogea said that companies who legally suspend their activities and start-ups in their first year of activity will not be affected. The Minister of Finance added that the introduction of the lump-sum tax will not lead some companies filing for bankruptcy.

"This measure has nothing to do with the crisis, but with equidistant and equitable treatment of economic agents," Pogea added. He also indicated that some 109,000 companies registered an average monthly turnover worth approximately €250. Moreover, Pogea said in a statement yesterday that the Finance Minister could withdraw or lower the reinvested profit tax as of this year's second half.

Prices are expected to rise 5.8 percent, according to the new calculations of the state budget, presented yesterday by the Ministry of Finance, which is also expecting 600,000 unemployed, compared to the present 513,000, and gross average wage of RON 1,820, below the RON 1,863 level registered in February. Exports are to drop 15 percent and imports by one quarter, which will contribute to a narrowing of the current account deficit to 7.5 percent of gross domestic product (GDP).

Business Standard