Romanias fiscal slippage risks remain significant fiscal supervisory body.

By bne IntelliNews May 11, 2012
The risks of fiscal slippage in Romania remain significant even though the government has revised its deficit target up to 2.2% of GDP from an earlier 1.9% of GDP, the independent fiscal supervisory body in the country warned in an annual report quoted by news agency Mediafax. The findings of the report cite the downward-adjusted growth projections and the Q1 budget execution. The turnaround out of harsh austerity policies already in place will push the fiscal gap above the target thus deteriorating investors' sentiment, the document said. The first-quarter deficit target was met only due to unsustainable policies - companies were forced to pay in advance their profit tax for the quarter, while the payment arrears of the central and local governments increased, the fiscal supervisory body explained. As we reported, the Q1 fiscal gap stood at RON 3.4bn (0.56% of the year's projected GDP) and remained within the quarterly benchmarks set with the IMF only thanks to an adjustment made to include the amount of public investments in excess to the quarterly targets. Romania's general government deficit narrowed by 35% y/y to RON 3.4bn (EUR 780mn) in the first quarter of 2012 on the back of nearly 10% higher revenues, the finance ministry has said earlier. The gap was higher than the RON 3.1bn benchmark target set under the government's agreement with the IMF, yet within the ceiling agreed with the Fund. The ceiling was agreed at RON 3.1bn plus the amount of public investments, which is above the RON 6.7bn target. Public investments (including capital spending and co-financing of development programmes) totalled RON 7.3bn in the first quarter of 2012.

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