As far as expenditures are concerned, personnel and welfare expenditures will drop, while goods and services expenditures will increase.
The Government has again come up with a rather optimistic budget for 2012, expecting revenues 7% higher than the revised revenue figure for 2011 and nearly 9% higher than the originally forecast level for this year, considering that the economy will at best replicate this year’s growth.
In an unusual move, the authorities have no longer announced a specific figure for economic growth, instead they have included the 1.8-2.3% interval forecast by the IMF in the draft budget.
Next year’s general consolidated budget is built based on overall revenues of RON195.3 billion and total expenditures of RON206.5 billion.
Experience shows that, in previous years, the authorities relied on unrealistic projections. This meant that harsh measures such as the VAT hike were needed to rebalance the budget. Governments have over the years tended to come up with optimistic budgets and forecast much higher budget revenues than those collected in the preceding year.
Whatever the taxation regime in place in Romania, public revenues as ratio to GDP remained relatively steady, at around 30-33%.
The authorities again risk overestimating their tax collection ability, while the risk of the economy going back into recession would make it very complicated to cut the budget deficit.
However, revenue forecasts in the last three years have been more moderate than 2009 forecasts, when government officials expected 18% higher revenues, which were proven wrong by reality and corrected through two budget revisions, with revenues in fact falling 6%.
Amid an adjustment of the economic growth forecast from 4% to 2% – the figure suggested by most forecasts, the budget deficit would increase by 0.8% to 1% of GDP, according to estimates.
The nominal deficit would be adjusted to RON11.2 billion in 2012, accounting for 1.9% of GDP according to the cash method and less than 3% according to European standards. In order to reach the 2012 target, it will be crucial to implement reforms in the healthcare system and to restructure public enterprises, according to the Finance Ministry.
(English version by Daniela Stoican)