Romania sets 2012 budget deficit at 1.9%

(BUCHAREST) - Romania expects to post a 2012 budget deficit of 1.9 percent but it could be much higher, with growth coming in at 1.7-2.7 percent, President Traian Basescu said Thursday.

"The draft budget is based on a 1.9-percent deficit," Basescu told reporters after meeting a joint mission of the International Monetary Fund (IMF) and the European Union.

The deficit could go up to 2.5 percent of Gross Domestic Product, depending on developments in the EU, and would hit 3.0 percent product if it included state-owned enterprises' arrears, as Brussels insists, he said.

In 2011, the budget gap is expected to stand at 4.4 percent.

"What is certain is that in 2012 the government will not reduce public spending earmarked for pensions and wages" again, the president said.

Authorities last year adopted a drastic austerity package which saw public wages cut by 25 percent and pensions frozen.

Basescu added that he was optimistic about the performance of the Romanian economy in 2012, after expected 1.5 percent growth in 2011.

"As long as Romania keeps its commitments to the IMF, the EU and the World Bank there is no risk of its economy derailing," he said.

The IMF and the EU are conducting a two-week review of the Romanian economy following the conclusion in March of a stand-by accord.