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Romanian 2006 budget gap widens to 1.7% of GDP

Romania's state budget deficit widened to 1.7% of GDP last year as spending increased before the country joined the European Union, the head of a parliament budget committee said.

Mihai Tanasescu, president of the committee in the lower house of parliament and a member of the opposition Social Democrat Party, said spending in December turned a surplus into a deficit for the year. The government targeted a 2006 deficit of 2.5% of GDP, from a deficit of 0.8% in 2005. Stelian Negrea, an adviser to Finance Minister Sebastian Vladescu, said in a telephone interview today that the government hasn't yet compiled definite 2006 budget figures.

„In the month of December the budget went from a surplus of 1.2% of GDP to a deficit of 1.7% of GDP,” Tanasescu said in a broadcast on Realitatea television. „In a single month the government spent almost 3% of GDP, putting enormous pressure on the central bank and Romanian financial resources.” Romania increased spending on roads, railways, pensions and other areas last year, mainly in December, to bring standards closer to those of the EU, which it joined on January 1.

The government plans to raise spending more this year, bringing the budget deficit to 2.8% of GDP. The International Monetary Fund and the EU have said Romania should seek to narrow its budget deficit to avoid accelerating the annual inflation rate from a record-low of 4.7% in November of last year and 4.9% in December. The Finance Ministry said on December 4 that the country had a state budget surplus of 2% of GDP, or 6.9 billion Romanian lei (€2 billion) in the first 10 months of the year although spending at the end of the year would drive it into a deficit. (Bloomberg)