IMF Cuts Romanian Growth Forecast to 0.9% from 1.5% for 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--The International Monetary Fund (IMF) cut its economic growth estimate for Romania to 0.9% this year and said that the government must enforce a series of measures by the end of September to keep its aid deal for the country on track. The IMF's Romanian mission chief, Erik de Vrijer, said at the end of a visit that a months-long political feud had hurt the economy. De Vrijer was visiting to review Romania's 5 billion-euro aid deal, which is to be tapped only if needed.

"The recent political turmoil in the country has taken a toll on the economy and dented confidence," de Vrijer said in a press conference, Mediafax reported. "We have forecast growth of 0.9% percent for this year." The IMF's previous estimate was 1.5%.

Socialist Prime Minister Victor Ponta is trying to remove suspended President Traian Basescu from office permanently, and the battle has stalled policymaking and raised concerns over the country's ability to stick to the terms of its IMF-led aid deal.

In a letter to Romania's government, European Union (EU) Commission President Jose Manuel Barroso said the EU will continue to monitor the situation "very closely and will pay particular attention to the developments since the referendum" in July 2012. Romania is a member of the EU. Barroso said in the letter dated August 10, 2012 that preventing the intimidation of high court judges is "essential for Romania's credibility and economic and financial stability."

By the end of September 2012, the government must work on lowering local administration arrears, raise gas tariffs by 5% for households and 10% for industrial clients, and launch tenders for the listing of a 15% stake gas pipeline operator Transgaz (Bucharest, Romania) and the majority privatization of chemicals company Oltchim (Bucharest, Romania).

The government has agreed to keep the budget deficit below 3% of gross domestic product this year, under European accounting standards. Last week, the Romanian government revised down its economic growth forecast to 1.2% in 2012 from 1.5% previously, saying it expected a weaker contribution from agriculture due to drought.

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