Thursday, June 18, 2009

Romania counts on IMF flexibility if crisis deepens

BUCHAREST, June 18 (Reuters) - Romania counts on flexibility from the International Monetary Fund should the economy shrink more than the projected contraction of around 4 percent this year, Finance Minister Gheorghe Pogea said.

Romania has secured a 20 billion euro aid package from international lenders including the IMF, in a move to safeguard its vulnerable economy in the wake of the global cash squeeze.

Under the terms of the deal, Romania is targeting a budget gap of 4.6 percent this year, under Romanian accounting standards -- or 5.1 percent under European Union rules.

But this target was based on a projection of an economic contraction of 4 percent in 2009, which some economists said it may be unrealistic, after first-quarter GDP data surprised markets on the downside, showing a 6.2 percent contraction.

'We've done different scenarios based on whether over the next three quarters we wouldn't record economic growth, or if it would be zero,' Pogea told local television Realitatea TV by telephone during a late talk show on Wednesday.

'Then we may have full-year growth of minus 6.5 percent, but I count on flexibility (from the IMF) and a widening of the deficit with the amount of revenues we lose (because of a stronger-than-expected contraction).'Last month, the IMF praised fiscal tightening taken by the Romanian government in response to the global crisis, saying reform steps may help soften recession.

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