IMF Sees Romania’s GDP Growth At +5% In '11, On Local Demand

"Economic activity turned down sharply in late 2008 and has fallen further in 2009. Growth is projected at about -4% in 2009 on account of a sharp contraction in domestic demand, which in turn will set off a correction in the current account deficit from 12.5% of the GDP in 2008 to 7.5% of the GDP in 2009," IMF said in a press release.

The institution also sees foreign direct investment and capital inflows dropping sharply. "Increased financial stress, tightening credit standards and limited access to external funding will inhibit lending to the private sector. Once confidence is restored, domestic demand is expected to slowly rebound, but growth will remain near zero in 2010, before recovering to 5 percent in 2011," IMF also said.

Romania’s GDP growth accelerated to 7.1% in 2008, from 6.2% in 2007, but its growth slowed down sharply in the last quarter of the year to 2.9%.

IMF forecasts the domestic demand will slowly rebound, once the confidence is restored, but the economy will stagnate in 2010, before growing by around 5% in 2011.

IMF also sees an 8.2% decrease in the internal demand in 2009, a 2.7% decrease in 2010, while in 2011 the domestic demand is seen 5.7% higher.

The fund also forecasts the current account deficit will adjust at 7.5% of the GDP in 2009, from 12.4% of GDP in 2008. Also, the external gap is seen at 6.5% of the GDP in 2010 and at 6.2% of the GDP in 2011.

IMF equally sees a gradual decrease of Romania’s budget deficit, at 4.6% of GDP in 2009, from 4.9% of GDP in 2008. The country’s budget deficit is seen narrowing at 3.6% of GDP in 2010 and at 2.7% of GDP in 2011.

Romania’s budget revenues will gradually increase their weight in the GDP, at 33% in 2009 and 33.4% in 2010, from 32.6% of GDP in 2008. Hence, the budget revenues will set at 33.1% of GDP in 2011.

IMF also forecasts Romania’s direct public debt will set at 23.6% of GDP in 2009 and at 25.7% of GDP in 2010 and 2011, from 20.1% of GDP in 2008.

Romania agreed end-March with the IMF, the European Union and other international institutions a EUR19.95 billion financial package, supported by a EUR12.95 billion IMF loan under a two-year standby arrangement.

IMF’s Executive Board approved Monday the agreement with Romania.
 

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