EBRD chops economic growth forecast of Romania

European Bank for Reconstruction and Development has reduced for the second time its economic growth forecast for Romania’s gross domestic product in 2009, from November’s 3% to 1%, reflecting the prospects of a deepening recession in the developed world and slowing economic activity in the region.

EBRD estimates Romania’s economy climbed 8% in 2008.

In its latest forecasts for economic growth, the bank still expected the EBRD region to avoid a blanket recession of its own. The EBRD now expects average 2009 growth of 0.1% in the 30 countries where it has investments, compared with a prediction of 2.5% based on country forecasts made in November last year, NewsIn informs.

The bank estimates that the region expanded by 4.8% in 2008, compared with the prediction of 6.3% made last November.

Chief Economist Erik Berglof said, “The EBRD region is feeling the full impact of the global slowdown, mainly because of the region’s increased integration within the global economy. The ability of these countries to withstand such a major external shock over the longer term will depend largely on the speed of the recovery of the global economy, the combined efforts of individual governments and International Financial Institutions, including the EBRD, to safeguard financial systems in the region, and the support of foreign banks to their eastern subsidiaries”.

Despite the lower short-term growth prospects, the mid to long-term expectations call for a rebound, possibly as early as next year due to the strengthening of economic fundamentals throughout the region, paving the way for the revival of economic momentum once the global economic downturn had abated.

EBRD expects economic growth at 1% in Russia this year, down from 3% predicted last November. In 2008, Russia’s economy increased by 6.5%, according to EBRD estimates.

South Eastern Europe is expected to grow by 1.5% this year, down sharply from the 7.3% estimated for 2008.

"Positive growth in these countries reflects still strong domestic demand, and in some cases lower levels of financial integration, but the risk of an even sharper slowdown is high", according to Erik Berglof.

Growth in the Central Europe and the Baltics is seen at 0.4 percent this year after 3.9 percent last year.

EBRD expects economic contractions this year in Ukraine, Hungary and the three Baltic states. The Ukrainian economy is expected to shrink by 5% in 2009, Hungary by 2%, with declines of 3.5%, 5% and 2.5% seen in Estonia, Latvia and Lithuania, respectively.

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