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IMF: Romania ’09 Pvt Lending Annual Growth Revised To -1.7% From +16%

The International Monetary Fund revised down its forecast on Romanian private lending, which is now seen declining roughly by 1.7% on the year in 2009 from a 16.4% growth initially estimated.

IMF projected more optimistic levels for the next couple of years, as it sees Romanian private lending growing at an annual rate of 5.6% in 2010 and 13.2% in 2011. Romanian private lending grew at sizeable annual rates over the past years, the IMF said in its report after the first review on Romania's progress related to a EUR13 billion loan it secured earlier this year. In 2006, private lending rose 54.5% on the year, with the figures reaching 60.4% in 2007 and a more modest 33.7% in 2008. According to the IMF, financial stress in the Romanian banking system eased significantly with the international support package and recovering global financial markets, but credit conditions remain tight. Since the announcement of the international financial package, Romania's leu remained "broadly" stable, allowing the central bank to focus on injecting cash into the banking system rather than intervening to support the currency, IMF noted.

As a result, bank funding costs decreased and interbank rates were brought down to the key rate level, it said."Lending conditions remain tight, however, due to stricter lending standards, worsening asset quality and lower demand, and real credit growth decelerated sharply from 25% year-on-year at end-2008 to 5% by mid-2009," IMF said.The IMF believes Romania's central bank will continue to adapt its monetary policy stance as "inflation and conditions in the foreign exchange market permit," but recommended precaution given inflation levels are well above the EU average and the economy "is vulnerable to significant further depreciation pressures due to large unhedged foreign currency debt of the nonfinancial sector, especially households."

IMF: Romania Unable To Curb Local Authorities Spending In H1

Romanian authorities were unable to rein in personnel spending with local authorities and self-financed institutions, which grew by up to 20% in the first half compared to the 6% rise in the central government, according to International Monetary Fund data."Current spending outside the central government (local governments and self-financed entities, such as universities and hospitals) was not reined in by measures to reduce bonuses and staffing and the impact of the large increases in wages and pensions in the last months of 2008 was higher than anticipated," the IMF said in its report after the first review on Romania's progress related to a EUR13 billion loan it secured earlier this year.

According to the report, Romania has met most of the targets for the first half year included in the initial program, but fiscal pressures call for "vigilance" in tackling challenges."This overshooting of current spending - particularly outside the central government - could endanger compliance with the fiscal objectives and lead to further undesirable cuts in capital spending unless reforms are successful at bringing it under better control," the report noted.Under the revised financial agreement, the IMF allowed Romania a higher budget deficit of 7.3% of the gross domestic product this year, compared to the initial cap of 4.6% of the GDP.However, Romania must implement additional spending cuts of 0.8% of the GDP in 2009 to avoid a gap otherwise seen at 8.1% of the GDP.Romania's budget deficit is seen at 5% of the GDP for the first nine months, Finance Minister Gheorghe Pogea said recently. Romania and the IMF have signed in spring a two-year standby loan agreement for EUR12.95 billion, as part of a larger financial aid amounting to EUR19.95 billion. The EU, World Bank and the European Bank of Reconstruction and Development also chipped in to help the eastern European country cushion the effects of the recession.The IMF agreement is subject to quarterly revisions and the second IMF mission is expected to arrive in Romania late October or early November.

Romania's 2011 Budget Gap Still Above EU Criteria

The International Monetary Fund revised up its forecast on Romania's budget deficit for 2011 from 2.7% of the gross domestic product to 4.2% of the GDP, above the maximum ceiling required by the European Union.The IMF estimates Romania's budget deficit will reach 7.3% of the GDP in 2009 and 5.9% of the GDP in 2010, according to the fund's report published after the first review of the EUR13 billion stand-by loan Romania secured in spring. Last year, Romania recorded a budget deficit of 4.9% of the GDP, which prompted the European Commission to launch an excessive deficit procedure against the eastern European country. End June, the EU finance ministers asked Romania to take corrective measures and bring the budget gap to below 3% of the GDP by 2011.Romania, which hopes to join the eurozone in 2014-2015, must register a deficit below 3% of the GDP in the years prior to the adoption of the European common currency.In spring, Romania has inked an agreement with the IMF, the EU and other international lenders for a EUR20 billion financial package, supported by a EUR13 billion stand-by loan from the fund.

Sursa: http://www.actmedia.eu

Tags: central financial billion spending budget european deficit romanias first growth annual lending revised international report romanian romania

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