Romania's economy minister expects a 7% budget gap in the GDP and a 6% economic contraction in 2009

The estimates of the economy minister are slightly more optimistic than those made by the Finance Minister Gheorghe Pogea last week, when he said the country's economy could reduce 6.5 – 7.1 percent this year.

Romania's government estimated after the budget revision in April a budget gap of 4.6 percent in the GDP this year and an economic contraction of 4 percent.

Following these circumstances, the economy minister deems it is mandatory to renegotiate the budget deficit targets settled with the International Monetary Fund (IMF). 

The government settled with IMF to fit in some budget deficit targets each quarter following the 20 billion euro agreement, and not exceed 24.36 billion lei at the end of December (4.58 percent of the GDP, estimated at 531.3 billion lei for 2009). 

For the end of the second quarter the target was established at 14.51 billion lei (2.73 percent of the GDP) and for the third quarter at 18.61 billion lei (3.5 percent of the GDP).

The Finance Minister Gheorghe Pogea declared on July 1 that the budget deficit for the first six months reached 2.7 percent of the GDP, slightly below IMF target, according to initial evaluations.

Romania's representative at IMF, Mihai Tanasescu, mentioned the deficit targets established with the Fund could be changed. 

However, the IMF representative for Romania and Bulgaria, Tonny Lybek, declared last week the Fund will not pay the next installment if the government fails to keep the budget deficit target established within the financing agreement with the Fund and the European Commission. 

If the program is not followed because of some internal decisions, the evaluation will not be completed and the money will not be sent, Lybek concluded.