Moody's May Revise Up Forecasts On Romania's GDP Contraction, Budget DeficitPublish date: 23-06-2009
Moody's might revise its forecasts on Romania's gross domestic product contraction and budget deficit, to reflect a worsening of these indicators, but the ratings agency does not expect a failure of the International Monetary Fund-backed financing program.
"Our most recent forecasts are for GDP to contract by about 4%, but I would say that will probably be revised higher (i.e. the contraction will be larger) soon. We expect a budget deficit of 5.1% of GDP (again, could be larger)," Moody's analyst Kenneth Orchard told MEDIAFAX.
Romania's current rating is predicated upon the successful continuation of the program agreed with the IMF and the EU; however, failure to continue with this program could lead to downward pressures on the rating, Orchard said.
Romania and the IMF closed in May a EUR12.95 billion two-year stand-by arrangement. The first tranche, worth of about EUR5 billion, was released after the IMF Board approved the loan.
"The outlook on the rating is stable. Generally speaking, Moody's is highly unlikely to upgrade any country that is in the early stages of an IMF program," Orchard said.
Moody's deems an abrupt failure of the plan is "extremely unlikely". However, if Romania fails to meet the targets, Moody's expect that the IMF and the EU will work closely with the Romanian authorities to build up a stabilization plan, Orchard added.
IMF sees a 4.1% contraction of Romania's GDP in 2009, while for 2010 the Fund estimates a zero economic growth.
Tonny Lybek, the head of the IMF mission in Romania and Bulgaria, recently said Romania's GDP drop in the first quarter might point to a possible economic contraction by more than 4.1% in 2009.
In the first quarter of 2009, Romania's GDP fell 6.2% on the year, according to the country's Statistics Institute.
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