The ratings on the Republic of Romania are supported by the improvement in general government fiscal indicators that has occurred on the back of buoyant domestic demand. GDP looks set to grow at almost 6% in 2005, with domestic demand expanding almost twice as rapidly. As a result, the general government deficit will reach 1.3% of GDP, despite a comprehensive tax cut associated with the introduction of the 16% flat tax in 2005, and additional spending pressures related to the floods affecting part of the country this summer. General government debt will drop to less than 20% of GDP in 2005, well below the 'BBB' median and aided by a strong appreciation of the Romanian leu and privatization receipts. As
