Coface cuts Romania's GDP growth forecast to 2% in 2012.

By bne IntelliNews November 23, 2011
Coface rating agency expects Romanias GDP to grow by 2% y/y next year under the baseline scenario, lower than its previous projection for 3% growth, Capital online daily reported. Romania's economy will remain on the positive side with a 1% growth even under the pessimistic assumption of the European economy undergoing another recession episode. The rating agency has maintaining the estimate for this years growth at 1.5%. The private consumption will stagnate this year and grow by 2% in 2012, under the rating agencys baseline scenario. The government will observe the 4.4%-of-GDP deficit target this year, probably reporting a 4% gap for the year, but will be unable to prevent fiscal slippage in 2012 unless the absorption of the EYU funds improves significantly or the GDP grows by more than 3%. Thus, the fiscal gap will widen to 4.5% of GDP under the baseline scenario. Since the government has not drafted any coherent and predictable strategy to boost revenues, it might be forced to rely on emergency fiscal austerity measures next year if it wants to meet the 3%-of-GDP target (under ESA95 methodology). But this is problematic given the parliamentary and local elections next year, the rating agency concludes.

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