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INTERVIEW-Romania aims to keep 2020 deficit goal despite worsening economic outlook

BUCHAREST, Oct 9 (Reuters) - Romania’s government will aim to keep its 2020 budget deficit target unchanged at 8.6% of gross domestic product in a revision expected in November, despite a potentially sharper economic contraction, the finance minister said on Friday.

Finance Minister Florin Citu told Reuters his worst case scenario was for the economy to shrink 4.2% this year, below the 3.8% contraction currently forecast by the centrist minority government due to the impact of the coronavirus pandemic.

“I would like to keep the current deficit target in the upcoming revision. The contraction will be plus/minus 0.2 around 4%,” he said, adding the government was working on new support and grant measures for sectors that were slow to recover.

On Friday, the number of new daily COVID-19 infections in Romania exceeded 3,000 for a second day, bringing the total to 148,886. The government has reintroduced restrictions in the capital Bucharest and other cities.

Even before the pandemic, Romania was struggling with a widening budget shortfall, eroded by years of political instability and fiscal largesse.

Asked whether Romania could tap foreign markets again this year, Citu said: “I am always looking at opportunities and whether market conditions are right.”

The country has tapped 6.3 billion euros and $3.3 billion from foreign markets this year.

Romania’s parliamentary opposition has recently moved to reinstate a 40% hike in state pensions that the government had watered down. Citu has repeatedly said the increase, which had prompted warnings of ratings downgrades, would not go through.

S&P, Moody’s and Fitch Ratings have Romania on their lowest investment grade rating, with negative outlooks. The country holds a parliamentary election on Dec. 6.

Citu said the 2021 budget would include fiscal consolidation and higher tax revenue from digitalisation. Also, roughly 1.0% of GDP worth of one-off higher spending measures directly related to the pandemic would be wiped off next year’s deficit target, he said.

“Fiscal policy will gradually shift to less stimulative to neutral throughout 2021,” Citu said. (Reporting by Luiza Ilie; Editing by Alex Richardson)