IMF Revises up Romania's GDP Growth Forecasts for 2009, 2010

IMF mission chief for Romania Jeffrey Franks also said in a statement the fund was optimistic about unlocking payments under a stand-by deal with the country in February.

IMF now expects Romania’s economy to shrink by 7.0% in 2009, compared to a 7.5%-8.0% contraction expected earlier. The economic growth forecast for 2010 was revised to 1.3% from the previous 0.5%, Franks said in the statement, released after the visit of and IMF technical mission to Romania on December 14-16.

In November, the IMF and the EU delayed disbursements under a 20 billion euro ($28.8 billion) aid package signed with Romania until the political situation in the country stabilises. Political uncertainty has been high in the country since the fall of its minority government in a no-confidence vote in October.

The re-election of Traian Basescu as Romania's president on December 6 has brought hopes that the two-month political deadlock will end. The country should form a government fast and the parliament should soon endorse the country's budget for 2010, one of the key requirements for unlocking the disbursements under the stand-by deal.

"Based on progress so far, we are optimistic that the staff can move the review quickly to the IMF Executive Board for a meeting by mid-February. Subject to the IMF Board’s favorable decision, disbursement can follow,” Franks said.

It added that a joint IMF, EU, and World Bank mission to conclude the second review under the IMF-led stand-by arrangement could take place in January, once a new government is in place and parliamentary action is forthcoming.

"The IMF and the European Commission agreed with the government at the technical level on the content of the 2010 draft budget. To achieve a cash budget deficit of 5.9% of GDP, measures of 2.5 percentage points of GDP were agreed, mainly on the expenditure side. [...] It is also important that progress be made in the coming weeks on key pending structural reforms, such as the pension reform and the fiscal responsibility law," IMF said.

The fund said that the country will meet this year the 7.3% budget deficit target agreed under the deal, as "markets have remained stable despite the recent political uncertainties, and we expect no undue difficulties in financing the fiscal deficit in the coming months."

($=0.6945 euro)