Thursday, October 6, 2011

Romania on track to meet 2011 deficit target-PM

BUCHAREST, Oct 5 (Reuters) - Romania is on track to meet a budget deficit target of 4.4 percent of gross domestic product this year, though volatile markets will hit its economic growth in 2012, its prime minister said on Wednesday.

Romania has agreed the target with international lenders including the International Monetary Fund under the terms of a 5.4 billion euro aid deal, funds it will draw on only if it needs them.

"In 2011, we are on course to achieve the agreed targets, of economic growth of 1.5 percent and to reach a budget deficit of 4.4 percent," state news agency Agerpres quoted Emil Boc as saying in the city of Ploiesti.

"Unfortunately, the growth forecast for 2012 is negatively affected due to turbulence and uncertainty on European and world markets."

Romania has completed a 20 billion euro IMF-led bailout and the government forecasts its economy, slowly recovering from a deep recession, would grow by 3.5-4 percent next year.

Romania central bank governor Mugur Isarescu said on Wednesday that Romania's annual inflation will be within the central bank's 2-4 percent target in September. Romania's annual inflation slowed to 4.3 percent in August due to a steep fall in food prices and weak domestic demand.

Annual inflation quickened to more than 8 percent earlier this year.

In Washington, the IMF said in a statement on Wednesday that headline inflation in Romania was expected to recede to around 5 percent by the end of 2011 due to better year-on-year comparisons following a July 2010 increase in value-added tax.

While high food and energy prices triggered inflation consultations with the IMF, the Fund said the danger of breaching limits in future reviews had eased. For 2012, these supply shocks are expected to abate, causing inflation to trend back down toward the central bank's 3 percent target, the IMF said.

The IMF added that risks to Romania's growth had tilted to the downside since its last review due to increased turbulence in world markets and spillover from the Greek debt crisis and lower growth in Europe.

It said financial market turbulence could prompt capital outflows and called for strong capital buffers in banks and tight banking supervision. It said the central bank should be prepared to provide liquidity to banks to preserve confidence. (Reporting by Sam Cage in Bucharest and David Lawder in Washington; editing by Ron Askew and Carol Bishopric)

No comments: