Thursday, February 19, 2009

Romania C/A gap may narrow to 8 pct/GDP in 2009

BUCHAREST, Feb 19 (Reuters) - Romania's current account gap may narrow to around 8 percent of gross domestic product in 2009 from 12 percent last year, while the country will record 'small size' economic growth, central bank deputy governor Cristian Popa said on Thursday.

'For this year we have around 10 percent ... my personal prediction shows it can probably be even 8 percent,' Popa told business television The Money Channel.

Popa would not estimate this year's economic growth but noted that the IT, food processing and pharmaceutical sectors have the highest chances for positive growth.

Popa has also predicted that foreign direct investment might decrease to around 3.5 billion to 4 billion euros this year against 9.2 billion in 2008, with the impact chiefly from slowing euro zone demand.

On Tuesday, Finance Minister Gheorghe Pogea estimated that FDI may fall by a third this year, adding to concerns about future access to cash needed to finance economic imbalances.

But economists said Pogea's forecast of FDI slowing to over 6 billion euros ($7.59 billion) could be optimistic, raising the spectre of a deeper slowdown in inflows that may threaten to destabilise the emerging economy.

Romania is one of Europe's most vulnerable economies because of its heavy dependence on foreign cash to plug a wide trade gap driven by rampant consumption in recent years.

Officials and the central bank have said Romania may seek foreign aid, possibly including an agreement with the International Monetary Fund to help finance short-term private sector debt.

Many economists believe Romania will have to seek funding from the International Monetary Fund to prevent a financing crisis, in a deal similar to rescue packages sought by Hungary and Latvia in 2008.

Central bankers did not give details as to what type of arrangement they would support but governor Mugur Isarescu has said a package could include current account money from the European Union, investment money from the EBRD and funding from the IMF.

'We're talking about a package with more financial institutions, focused mainly on an appeal towards European institutions and, very possibly, comprising the Fund,' Popa said.

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