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IMF halves Romania's growth forecast

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(BUCHAREST) - The International Monetary Fund on Monday said it had halved its 2012 growth forecast for Romania to around 2.0 percent, due to international economic turbulence.

"Uncertainties at a global macroeconomic level have risen and Romania's growth forecast has worsened, now standing between 1.8 and 2.3 percent," IMF chief of mission Jeffrey Franks told a press conference.

The forecast could improve depending on better use of the 20 billion euros in European aid set aside for Romania until 2013 and on rising internal demand, he stressed.

"After painful adjustment in 2010, growth has returned and is expected to stand at 1.5 percent in 2011," the EU's head of mission Istvan Szekely said.

"We expect growth to strengthen in 2012, but not as much as previously forecast, because of a less supportive external environment," he added.

The IMF and the Romanian government had previously predicted growth would reach 4.5 percent in 2012, but last week president Traian Basescu said the figure had been revised down in the draft budget and stood between 1.7 and 2.7 percent.

Franks praised Romania's "cautious" fiscal policy aimed at slashing the public deficit from this year's 4.4 percent to 1.9 percent in 2012.

But he stressed that no further austerity measures would be needed after last year's 25-percent cut in public wages and pension freeze.

He added that the IMF would not oppose a "slight" increase in public wages, no higher than 3.0 to 5.0 percent, in the second half of 2012, if the government had fiscal space for it.

In March, the IMF and the EU decided to grant Romania a fresh credit line of five billion euros ($6.8 billion dollars) to be drawn only in case of emergency.

Franks said that all conditions set under this agreement had been met and stressed that Romania had no plans to draw on this aid.


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