IMF Sees Romanian Econ Contracting By 8.5% In ‘09

In addition, Romania’s inflation is expected to reach 4.3% this year, lower than IMF’s 4.5% forecast in March.

“Now, we see a lower inflation of around 4.3% of the GDP,” said Jeffrey Franks, head of the IMF mission to Bucharest.

Speaking in a press conference, Franks said the IMF’s revised estimations on Romanian economy are based on the worsening conditions in the first half-year, and do not reflect a deficiency in Romanian policies.

The IMF official said Romania’s balance of payments contracted faster than anticipated in the first half-year, and the current account gap is now seen at 5.5%, from the initial rate forecast of 7.5%.

IMF’s fresh projection is based on a worse-than-expected deterioration of the Romanian external evolution, as well as on lower domestic demand, Franks mentioned.

He said Romania and the IMF have agreed on a budget deficit below 6% of the gross domestic product in 2010, from a 7.3% cap allowed this year.

However, the authorities in Bucharest are expected to operate a budgetary adjustment of 2.5% of the GDP to meet the deficit target, Franks said.

An IMF mission was present in Romania for a first review on the country’s progress in meeting the terms related to a EUR19.95 billion IMF-led aid package inked this spring.