Bancherul - BANCI / ENGLISH / IMF: Romania’s economic growth is seen slowing to 4.7% in 2009

Romania’s economic growth is seen slowing to 4.7% in 2009 and possibly to harsher levels, on likely spillovers from global financial market turmoil, the International Monetary Fund said Tuesday.

“We see real GDP growth remaining close to 6% in 2008 but then slowing to below 4.7% in 2009,” IMF mission chief Albert Jaeger said during a press conference. “There is a risk in our minds that the slowdown in 2009 could be much harsher, although the timing is very difficult to pin down,” he added, cited by Mediafax.

The IMF said Romania’s economic growth has been robust at 6% in 2007 and would have stood at an extensive 8% if a farming output decline caused by prolonged drought wasn’t taken into account.

Romania’s economic growth has been robust in recent years, increasing an average 6.5% each year between 2003 and 2006. In 2007, the country’s economy grew 6% on the year in real terms, a slowdown compared with 7.9% a year earlier.

Jaeger said the economic growth slowdown would help reduce pressures on the country’s resurgent inflation, but added fiscal policies, which were highly expansionary in 2007, will also have to help disinflation.

The IMF warned there’s a serious risk that Romania’s budget deficit might come significantly higher than projected, given 2008 is an election year.

“The government should resist any proposal to either reduce revenues or increase spending,” Jaeger said, adding the 2008 budget projects overoptimistic revenues.

The IMF urges the Romanian authorities to lower the deficit ceiling to a more appropriate 1.7% of GDP to avoid jeopardizing the fiscal target.

Romania’s government targets a budget deficit of 2.3% of GDP this year, after lowering it from an initial 2.7% of GDP.