IMF, EU trim Romania's growth forecast

The International Monetary Fund (IMF) and the European Union on Sunday said they had trimmed Romania's 2012 growth forecast to 1.5-2.0 percent, due to international economic turbulence. "For 2012 we have slightly revised down our forecast in light of the more difficult economic environment in the euro area," the IMF's representative Jeffrey Franks told reporters in Bucharest. "We now project growth of 1.5 to about 2.0 percent, depending on improved domestic demand and better absorption of EU structural funds." An earlier forecast put growth between 1.8 and 2.3 percent. Despite the adjustment, Romania's economy will still perform better than the EU, he stressed. The IMF and the EU expect 2011 growth to stand at 2.5 percent, higher than anticipated, thanks to strong exports and bumper harvest. Official figures are to be released by the statistics institute on February 15. Franks said the austerity measures adopted by Romania under a 20-billion-euro bailout plan concluded with the IMF and the EU in 2009 had started bearing fruit. The plan led to a 25-percent cut in public wages and a pension freeze. Romania last year concluded a second, precautionary-type agreement with the IMF and th EU on a credit line of five billion euros to be drawn only in case of emergency. "Romania is better prepared than other EU countries to cope with the economic crisis," Franks stressed. But he called on authorities to continue prudent fiscal policies. "With the upcoming elections and the economic growth slowdown, it is essential to stay the course of reforms." The IMF and the EU representatives insisted on a gradual deregulation of the electricity and gas sectors, stressing this was essential to ensure proper market functioning and trigger urgently needed investment. They also called on the government not to abandon plans to reform health care, after a controversial bill was withdrawn last month. "Comprehensive reform is needed to put the health sector on a sustainable footing and improve its efficiency," they said.