BUSINESS

The fiscal consolidation process, more than necessary, Lazea BNR

The fiscal consolidation process was more than necessary for Romania, not only because it was demanded by the IMF and the European Commission, but also because markets themselves asked for it, Valentin Lazea, the chief-economist of the Central Bank (BNR) said in an interview with HotNews.

“In order to stabilise the public debt under 40 pc of the GDP, I personally consider that it would be enough to reach a zero primary deficit – i.e. the total budget deficit is equal to the annual sum spent by the state on interests, in our case about 1.7 pc of the GDP,” the BNR chief-economist explained.

According to the Central Bank official, if – for example – we suppose that the potential growth of GDP in Romania (in absence of an increased absorption of European funds) is 2 pc a year and that economy really advances by 2 pc a year (meaning that one would eliminate the cyclic component), then the budget deficit allowed by the Fiscal Pact would stand at just 0.5 pc of the GDP. This would translate into a fairly rapid decrease of the public debt, a drop that is debatable, to say the least, in the case of Romania.

Coming to the sources of growth in 2012, industry (especially the exporting branches) will continue to perform, although at more modest rates, Lazea believes. “Services and the construction sector will experience a positive evolution, given the favourable base effect (the fact that it starts low), while agriculture will remain – as always – heavily influenced by weather. Thus, even without a massive improvement of the absorption of European funds, we can grow by 1-2 pc this year, and the figure might improve as the absorption rate increases,” Valentin Lazea explained.

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