Pogea: A 1% fall of economic is not a collapse

Minister of Finance, Gheorghe Pogea (photo) said there was the likelihood of a higher decline of economy than 1% of GDP in 2009, but it didn’t mean this would precipitate into an economic collapse.

“I don’t think this negative growth will precipitate into economic collapse. It’s only an issue more difficult to solve in the current market conditions. We will however try to limit the freefall of economic growth, to shore up the economic interests of individuals, to meet the 2014 deadline set for the accession to euro area, and to establish a synergy between our achievements and the European rescue plan”, Pogea explained.

The minister of finance added that if Romania faced a serious contraction, the budget deficit would hence widen.

Romanian authorities are currently handling talks with International Monetary Fund for a two-year agreement. The total amount of the rescue package from IMF and European Commission would probably hover around 18 – 20 bln euros, said Mihai Tanasescu, representative of Romania in IMF.

Boc: The loan agreement with EC and IMF will serve as a precautionary measure

The loan Romanian authorities will take from the International Monetary Fund (IMF) and the European Commission (EC) is preventive and does not force authorities to raise the flat tax and the value added tax, premier Emil Boc said, cited by NewsIn.

Romania could take 13 billion euros, of the 18 billion euro possible loan, from the IMF while the rest of the money will be borrowed from the EC, the World Bank or other financial institutions, people close to the negotiations told NewsIn yesterday.

Romania could strike a two-year agreement with the IMF and receive an 18 billion euro loan to cope with the economic crisis which narrowed the incomes to the state budget. Two thirds will go to the central lender BNR and the rest to the Finance Ministry which is to give some to banks.

“We are to conclude this accord to prevent the negative consequences of the crisis on Romania’s economy,” Boc said.

IMF: 4% decline of economy and 4.7% budget deficit

Experts of International Monetary Fund said in briefing after the assessment Romanian economic climate that it expected a 4% decline in gross domestic product and 4.7% budget deficit of GDP, Cotidianul daily informed.

Evaluations are due to be made public within a few days, in an IMF document. In case the figures are confirmed, these forecasts would be the bleakest ever made. The Government’s budget plan for 2009 was revised on a 2.5% economic growth and 2% budget deficit assumption.

NewsIn learnt that one of the assumptions on the table for Romanian government in negotiations with IMF was 3-3.5% budget deficit of GDP, in case Romania would fall into recession.

Cotidianul said, citing sources close to the issue, that the Government would borrow 18 bln euros to be remitted in equal quarterly portions over the next two years from International Monetary Fund and European Commission.

In this two-year timeframe, Romania will not be bound to reimburse anything, but will be due to return only the interests over the following three years, with another two years available to pay the full amount.