Government intends to cut spending by 2.2% of GDP

The Government intends to spend the same amount in RON as in 2010, but this entails a harsh adjustment in real terms, by 2.2% of GDP, which did not occur in 2009 and 2010.
Romania needs to adjust its budget deficit to 4.4% of GDP next year, from the 6.8% of GDP forecast for this year, with the government deciding to make this adjustment by means of significant spending cuts.
Plans are very ambitious as far as spending adjustments are concerned - spending is set to be cut by around 2.2%, from 39.1% of GDP to 36.9% of GDP, while the share of revenues to GDP will only climb from 32.3% to 32.5% of GDP, i.e. by 0.2 %.
The authorities will therefore seek to do next year what they could not do in 2009 or this year, when the share of revenues to GDP was only marginally down. In 2009 the share of spending to GDP was 39.4% compared with 37% of GDP in 2008.
2011 spending is estimated to stand at 200 billion RON, equal in nominal terms to the 2010 estimate made after the budget revision, whereas the original budget provided for an overall spending of 208 billion RON, i.e. 8 billion RON (2 billion euros) more.
The share in the GDP is down because the GDP is set to grow to 543 billion RON, from the 512 billion RON estimated for 2010.
The decline is set to come from personnel spending (-1.6 billion RON, to 40.6 billion RON), from goods and services (-1.6 billion RON, to 27.3 billion RON) and from subsidies (-0.6 billion RON, to 5.8 billion RON).
As far as revenues are concerned, the authorities seem to venture an optimistic draft budget, as in previous years. Whilst state budget revenues are estimated to rise by around 15%, consolidated budget revenues are expected to increase by nearly 7% in 2011, risking to overestimate the tax collection ability.