EBRD reduces Romaniaaa‚¬a„¢s GDP forecast for 2010 to minus 3 percent

The European Bank for Reconstruction and Development (EBRD) announced yesterday that it has revised its forecast for the Romanian economy to – 3 percent in 2010 after having previously estimated a zero growth. For 2011 also, EBRD has reduced its growth forecast to zero from an initially estimated 3 percent economic increase.

“This reflects disappointing Q1 figures and a major fiscal consolidation agreed with the IMF in June, which includes cuts of up to 25 per cent in public sector wages and a 5 percentage point increase in VAT, both of which will further dampen domestic demand in the short term”, reads the EBRD report

For the remainder of 2010 and 2011, the outlook for Central and Eastern Europe is generally weaker than recent economic activity suggests, according to the same source. CEE countries depend heavily on trade and financial links with the EU. Credit growth also is expected to remain weak as long as banks’ balance sheets remain under pressure and the cost of capital high.

“As a result, the growth forecast for the EBRD’s region of operations has been modestly revised downward, by 0.2 percentage points since the last EBRD forecasts in May to 3.5 percent in 2010, and by 0.1 percentage point in 2011 (from 4 to 3.9 percent). The downward revision is most pronounced in both years for south-eastern Europe where the recession appears to be lingering”, concludes the report.

Simona Bazavan

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