IMF drops Romania's 2012 economic growth forecast to 2% due to contagion risks

The International Monetary Fund (IMF) will review the forecast on Romania’s economic growth down to 2 percent from a previous estimate of 3.5 to 4 percent due to the amplified external risks of contagion, according to Jeffrey Franks, the head of the International Monetary Fund (IMF) delegation in Bucharest, quoted by Mediafax newswire. The external risks of contagion increased in the last three months, and Romania needs to maintain and even accelerate the reform of the IMF program. “It is not Romania's fault, but the fault of external factors. For this reason it is especially important that the reform program is maintained. The program is the insurance policy required to minimize these effects on Romania in the future,” said Jeffrey Franks, quoted by Mediafax. For this year, the Romanian government and the IMF expect a GDP advance of 1.5 percent. Romania has implemented harsh cost-cutting measures last summer to meet the demands of the EUR 20 billion loan agreed in 2009. The measures, which have sparked mounting social unrest, included a 25 percent cut in public salaries, a controversial pension reform, public sector layoffs and tax raises. The measures were made in order to reduce budget spending, and thus the budget deficit. Irina Popescu, irina.popescu@romania-insider.com (photo source: Sxc.hu)