How 8 billion Euro disappeared from the GDP in just 6 months

Publish date: 11-07-2010
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At the end of this year Romania's economy could prove to be 8 billion Euro short of the Government's January estimate, namely of just 118 billion Euro instead of 126 billion Euro, the loss being of over one billion Euro per month since the first forecast and until today's.

According to the forecasts of Romanian banks, instead of the GDP dropping 0.5%, the recession could more likely be of 3%. That would mean that this year Romania would produce and consume even less than last year. Weaker demand from the population means a drop of sales for companies and, implicitly, either salary freezes or salary cuts, or even new layoffs. At the same time, a larger economic drop than forecast would also mean less income for the state budget.

The Government has three choices for "solving" the problem: either it exceeds the budget deficit imposed by the IMF, of 6. 9% of GDP, which would endanger the agreement and could make the exchange rate explode, or it cuts more of the state's expenses (to adapt them to the smaller income), or it will again look towards the population for more money, through new or larger taxes and duties.

Gandul

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