“We see high risks for year-end targets that are likely to be evaluated during February 2010 in a fourth IMF mission (end-September targets should be OK). We believe the fourth IMF mission might find itself asking the government to adopt harsh measures given that imbalances are likely to grow larger,” ING said

ING stressed that IMF’s lax approach to the Romanian authorities had proven to be damaging.

Moreover, by February 2010, it could be obvious that the Romanian economy could fall less than 8% in 2009 which should act against the IMF finding reasons to allow a larger budget deficit in 2009”, report found.

On the other hand, given the 7.3% of GDP target agreed with the IMF, the deficit would need to increase by less than 2% of GDP during fourth quarter 2009 and no measures were taken in this direction.

In addition, last year the budget gap expanded during the fourth quarter from 1.4% to 4.9% of GDP, while in fourth quarter 2007 it moved from a surplus of 0.2% of GDP to a deficit of 3.1% of GDP.

“Given the recession underway in Romania and the likely weaker control from the government in the current environment, we would say that even our forecast of 7.7% of GDP seems optimistic and something like 8.5% to 9% of GDP would be consistent with historical developments”, ING Bank report said.

As for the performance of currency markets, ING said the net outflow resulting from FX interventions stood at about €1.1bn in September.

“This is one of the largest monthly outflows from supporting the RON and it confirms our view that the NBR has intensified its actions in the FX market towards the end of the month”, ING added.

Romania’s FX reserves touched a new all-time high in September after the second disbursement of €1.85billion under the stand-by arrangement with the International Monetary Fund and the second special SDR allocation of approximately €156 million.

FX reserves amounted to €28.339bln last month, up €596mln (+2.14%) compared to August.