“Given the critical need for fiscal reforms in the coming period (public wage and social benefits cuts coupled with public sector layoff and/or a raise in taxes), as well as the GDP data announced yesterday, we have decided to lower our economic growth forecast for 2010, from 0.9% to -1.4% (IMF predicts an economic contraction of 0.5%). We admit the situation could be worse but for the time being, there are no strong arguments in favor of that. Also, our economic growth projections for 2011 have been reduced to 0.2% from 1.5%. Following the revision, we intend on reconsidering our inflation, EUR/RON and budget deficit forecasts”, ING said in a report released Friday.
Also ING analysts expect the national currency to remain weak against euro, but losses should be limited since NBR is very likely to defend the 4.20 lei/euro rate.
“We expect the short-term rates to drop further. The Ministry Public Finance has decided to reject all bids for yesterday’s bonds, despite our expectations of high-yield payment. This strategy suggests IMF is not doing the proper thing as the volume of outstanding payments is significant and it affects the real economy”, ING said.
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