BRD: Romania Needs Higher Tax Collections To Trim Budget Deficit

The authorities in Bucharest have pledged to reduce the budget deficit to 4.4% of gross domestic product in 2011, from a gap of 6.5% of GDP a year earlier. End-2009, the country's deficit stood at 7.4% of GDP.

"I believe it (cutting the budget deficit) will be more difficult in 2011. If last year we were talking about a reduction of one percentage point, this year we must lower it by two percentage points, which will be much more difficult," Florian Libocor, chief-economist at BRD, told a banking seminar.

Libocor said one solution would be to improve tax collection and to intensify the fight against tax evasion.

"Tolerating evasion will get us nowhere," he added.

The BRD's economist said Romania must bring the revenue level to 35% of GDP before considering less restrictive spending.

"Until then, fiscal adjustment must continue," Libocor said.

In 2010, Romanian budget revenue reached 33% of GDP, slightly up from 32% of GDP in the previous year.

BRD revised upward its forecast on the year-end inflation to 4.5%, from around 3.5% previously, estimating increased pressure from international prices of food and fuels.

"A possible depreciation of the leu would trigger additional inflationary pressures. The year-end forecasts have been already revised upward and a depreciation of the national currency would make it rather difficult to control inflation," Libocor said.

The central bank has recently revised its year-end inflation forecast to 3.6% in 2011, from 3.4% initially. For 2012, the bank forecasts an annual rate of 3.2%.

If you liked this story, please follow MEDIAFAX.RO on FACEBOOK »

The content of mediafax.ro is for your information only. Republishing or using this content is forbidden without express consent of MEDIAFAX. For this consent, please ask for it by mail at vanzari@mediafax.ro.