EBRD worsens forecast: recent measures will spell 3% economic decrease for Romania this year

The European Bank for Reconstruction and Development (EBRD) expects Romania to post an economic drop of 3 percent this year, which will reflect the evolution in the first quarter of the year and the fiscal measures taken as part of the agreement with the International Monetary Fund (IMF). The EBRD's previous forecast, issued in May, was of economic stagnation for Romania. For next year, EBRD expects Romania to have a zero economic increase, while in May it was expecting a 3 percent economic increase. “Growth is projected to be negative in 2010 in the two EU members, Bulgaria and Romania; in the latter, we have revised our forecast downwards significantly for 2010 from 0 to minus 3 percent. This reflects disappointing Q1 figures and a major fiscal consolidation agreed with the IMF in June, which includes cuts of up to 25 percent in public sector wages and a 5 percentage point increase in VAT, both of which will further dampen domestic demand in the short term,” wrote EBRD's recent economic outlook report. Preliminary results for 2009 show the Romanian economy had a contraction of 7.1 percent, according to the EBRD report. Download the entire report here.