The economic growth the Finance Ministry and implicitly the Government will bet on next year is uncertain, and the estimates about the gross domestic product (GDP) growth vary quite a lot. While the National Forecast Commission is getting ready to revise the 2012 growth estimate downwards to 2.5%-3.2% from 3.5%-4%, President Traian Basescu recommends the government build the budget around a hypothetic 2%-2.5% GDP growth.
Although 2012 looked like it was going to be better than 2011, now some international banks anticipate a GDP growth of merely 1%, that will be even weaker than this year’s growth.
Firmly set is only the budget deficit of 3% of GDP. The significant decline of the budget gap next year from this year’s 4.4% of GDP is the main problem. The revised economic growth forecast has a significant impact on the budget. Moreover, the inclusion in the budget of the loss-making state-owned companies further compounds the problem.
Gheorghe Gherghina, the man who has been building Romania’s budget for well over a decade and one of the few Romanian budget policy specialists, on Wednesday said that the revision of the 2012 economic growth might happen, though not for local but external causes. “To Romania, EU resources are the most important development and economic growth support, which can be used towards economic growth. It’s highly likely the 2012 growth forecast will be revised, mostly due to the links with other EU states rather than to the situation on the local market.”
Poland, the only European economy to have avoided recession, took advantage of both export competitiveness and domestic demand. It is also a good example when it comes to European fund absorption. Poland expects 4% economic growth next year.
In Romania’s case, exports were the main driver that helped it overcome the crisis, considering domestic consumer spending has yet to rebound, but the contribution of exports seems uncertain in the future, because of the slowdown of Western economies. Although exports continued to go up this year, the growth pace of EU trade partners has already slowed down. Investments did not go well and are not showing any signs of a rebound, while in terms of European fund absorption, Romania has become EU’s laggard.
“The absorption of EU funds is the only thing that can help us dampen external shocks. Absorption of EU funds should become top priority,” believes Ionut Dumitru, Fiscal Council chairman.
An accurate forecast for the GDP is essential to build the annual budget. Experience, however, shows that the authorities relied on baseless hypotheses in recent years, which were later proven wrong by reality and harsh measures such as the VAT hike were needed.
(English version by Loredana Fratila-Cristescu; Editing by Radu Bostan)