Romania’s GDP is expected to go up 2.2 percent next year, with domestic demand growth supported by greater absorption of EU funds and positive nominal private sector credit growth, according to the International monetary Fund (IMF).

In their recent report, the IMF also anticipates improvement in the external environment will support continued export growth, however the country’s GDP is only expected to increase by more than 3 percent in 2017.

The inflation is expected to further decline during the second half of 2013, while the headline inflation is projected to continue easing in the next two years, “as lower inflation expectations become more entrenched”, states the report.

However, besides this baseline scenario, the IMF also analyzed an adverse scenario that shows a more protracted recession or renewed financial tensions in the euro area that could “hamper exports, spark a further retrenchment of foreign investment and accelerate bank deleveraging”.

In addition, a renewed political uncertainty in the run-up elections in the country in 2014, mainly the presidential elections, “could weigh on investor and consumer sentiment,” shows the IMF report.

In this reverse scenario, Romania’s GDP would go up only 0.3 percent in 2014 and 2.3 percent in 2015.

See the entire IMF report here.

The Executive Board of the International Monetary Fund (IMF) approved on September 27 a new stand-by arrangement (SBA) for Romania of EUR 1.98 billion.

The new arrangement has a duration of two years and the Romanian authorities intend to treat the SBA as precautionary.

This is Romania’s third agreement with the IMF since 2009.

The first package was worth EUR 20 billion, out of which some EUR 13 billion came from the IMF, while the second one was signed in 2011 and was worth some EUR 5 billion, out of which EUR 3.6 billion were from the IMF.

Irina Popescu, irina.popescu@romania-insider.com

(photo source: Sxc.hu)