Thursday, July 9, 2009

IMF to cut Romania 2009 GDP forecast

BUCHAREST, July 8 (Reuters) - The International Monetary Fund will revise downwards its forecast for a 4 percent economic contraction in Romania this year, Bucharest's representative to the Fund in Washington was quoted on Wednesday as saying.

Like most of its neighbours, Romania slipped into recession this year as the world crisis slashed lending and consumption and forced it to secure 20 billion euros in IMF-led financial aid in March.

"We are working on a new forecast," Mihai Tanasescu told daily Cotidianul. "The (GDP) fall will certainly be deeper than that we initially estimated."

Under the terms of the IMF deal, Romania must enforce vast public sector reforms, but was allowed to keep a budget deficit target of 4.6 percent of gross domestic product this year -- in Romanian accounting standards -- barely smaller than in 2008 and far above EU limits.
The Romanian economy shrank by 6.2 percent on year in the first quarter, far worse than economists had expected. But the finance ministry has said Romania counts on flexibility from the IMF if the economic pain worsens.

Tanasescu did not comment on whether the IMF will set a new deficit target for Romania.
A mission of IMF experts will review Romania's progress in early August before the Fund approves the loan's second tranche.

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