IMF Cuts Romania’s ’09 Econ Growth Forecast To 3.5%, From 4.8%

“Since the October forecasts, the international financial turmoil has intensified and resulted in a further deceleration of real economic growth,” IMF representative in Romania and Bulgaria Juan Fernandez-Ansola told MEDIAFAX Wednesday.

He added that the financial crisis has adversely affected Romanian banks’ ability to get financing from abroad, as funding costs have increased and exposure limits have been reduced, which affects investments and consumption.

“Furthermore, a severe slowdown in export markets, mainly in the EU, will affect Romanian exporters, although certain types of more price sensitive goods may be less affected,” Ansola said.

Romania’s Prognosis Commission forecasts a gross domestic product growth of 9.1% for this year and 6% for 2009. The central bank sees the GDP up 8-9% in 2008 and 4-5% in 2009.

IMF kept its 2008 GDP growth forecast of 8.6%, on a “strong momentum, especially from a good harvest.”

“But consumer confidence is already affected, as evidenced by the drop in car sales, although several factors are at play,”  Ansola  said.

Several companies have already delayed investment projects, mainly due to more expensive funding and increased uncertainty. “Thus, we see continued strong growth in Q3, but a slowdown in Q4 and certainly in Q1 2009,” Ansola said.

The IMF official sees a slowdown in investments, particularly in the construction industry, followed by a deceleration in consumption and then in exports.

“Obviously, much will depend on the policy reactions in industrialized countries – both regarding bank funding and exports – as well as Romania’s ability to utilize this one time opportunity of EU funding to develop its lacking infrastructure,” Ansola added.

On Tuesday, the European Bank for Reconstruction and Development revised upwards its estimation regarding Romania’s economic growth in 2008, from 5% to 7.5%, but lowered its forecast for next year’s economic growth, from 5% to 3%.