BUSINESS

Gov’t revises economic growth forecast from 1.5 to 1.2 pc of GDP

According to Premier Victor Ponta, the revision was caused by the effects
of the drought in the agriculture sector, but also by the fact that the former government’s forecast on the absorption of EU funds was “overoptimistic.”

The government revised downwards its economic growth forecast from 1.5 to 1.2 per cent of GDP. At the same time, the state budget’s revenue target will be lowered by over RON 2.1 bln (0.4 per cent of GDP) this year (given estimated revenue drops from excises, VAT, EU funds, income taxes and property taxes), while its expenditures are estimated to drop by RON 753 M. The budget rectification draft obtained by Mediafax reveals that the government has revised downwards its estimated excise revenues (by RON 918.6 M or 0.2 per cent of GDP), non-fiscal revenues (by RON 1.8 bln), (by RON 2 bln), capital revenues (by RON 432.7 M), revenues from social insurance contributions (by RON 179.6 M) and revenues from profit tax (by RON 91.8 M).
The revision was caused by the effects of the drought in the agriculture sector but also by the fact that the former government’s forecast concerning the absorption of EU funds was “overoptimistic,” Premier Victor Ponta stated yesterday. He pointed out that unlike last year, when there was an “exceptional” bumper crop, this year’s agricultural production estimates are negative. The Premier added that the former government’s forecast concerning the absorption of EU funds was overoptimistic and the audit missions conducted by the European Commission for the 2010-2011 period mean lost funds. Ponta also referred to former PDL Labor Ministers Ioan Botis, Sulfina Barbu and Sebastian Lazaroiu. In her turn, Labour Minister Mariana Campeanu stated after meeting the IMF delegation that the economic growth level forecast for 2012 will be known after the talks with international financial bodies end. “It’s something we will finalize at the end of the talks, at any rate it will be over 1 per cent,” the Labour Minister stated.
At the same time, the government stakes on hiking its VAT revenues (by RON 2.3 bln), income and salary tax revenues (by RON 430.9 M) and property tax revenues (by RON 288.8 M). Likewise, the Property Fund’s revenues are expected to drop by RON 430 M. Sources familiar with the negotiations with the IMF stated for Mediafax on Wednesday that IMF experts will accept an economic growth higher than 1 per cent this year despite the poor agricultural production and the economic slowdown registered in the Euro Area, the estimated nominal GDP set to drop slightly from RON 607.5 bln to RON 607.3 bln on a deflator rising from 3.3 to 4 per cent.
Lower expenditures
Budget revenues are diminished, on balance, by RON 753.8 M, a reduction mainly covered by canceling the 10 per cent sums withheld from the approved budget. According to the law, at the start of the year budget managers allocate budget funds after withholding 10 per cent of the sums. These withheld sums are allocated in H2, after the government analyzes the budget execution in H1. Expenditures on personnel will rise by RON 648 M, mainly as a consequence of the fact that public sector salaries were hiked, while expenditures on the payment of interest will grow by RON 862.1 M. The government claims that although they were hiked as a consequence of the fact that public sector salaries grew, expenditures on personnel continue their downward trend, being estimated to stand at 6.7 per cent of GDP and thus falling below the 7.2 per cent of GDP target established by law.
At the same time, expenditures on projects financed from non-reimbursable external funds are lowered by RON 1.4 bln, while other transfers are lowered by RON 343.5 M. Other expenditures drop by RON 42.4 M. The budget for non-reimbursable external funds is lowered when it comes to both revenues and expenditures by RON 14.4 M, while the budget of the single national health insurance fund is hiked when it comes to both revenues and expenditures by RON 2.3 M. In order to cover the aforementioned fund’s deficit, its budget revenues will receive another RON 54.9 M from the Health Ministry’s budget.
The social insurances budget due to the public pension system will be hiked by RON 155.5 M, by hiking current revenues by RON 398.8 M and by diminishing the state budget subsidy by RON 243.2 M, while the expenditures will be hiked by RON 155.5 M.
Likewise, according to the same document, the funds earmarked for the infrastructure development programme and for the construction of sports centres in rural areas, funds obtained from sums deducted from VAT, will be lowered by RON 100 M. The sums deducted from VAT and meant to cover the financial rights of personal assistants of severely disabled persons will be hiked by RON 100 M.

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