Threat of a third year of recession looms, IMF calculations suggest

The IMF is considering the risk that 2011 could be the third consecutive year of recession for the Romanian economy, recognising for the first time in its calculations the possibility of a 1% GDP decline, say sources taking part in discussions with the Fund's mission present in Bucharest over the last few days to "outline" next year's draft budget.

"A novelty would be that the IMF is considering a -1% negative scenario, with expectations ranging between -1% and +1%, after so far they had only been talking about economic growth for next year," the quoted sources told ZF. Officially, the IMF forecasts 1.5% economic growth for next year, but since the beginning of the stand-by arrangement in the spring of 2009, official forecasts of the institution have consistently proven "one step behind reality," being adjusted downwards from one quarter to the next.

On the other hand, official sources say Premier Emil Boc dismisses a recession scenario as a working hypothesis for 2011, and asks for a budget built on expectations of economic growth, albeit a modest one.

Sebastian Vladescu, former finance minister until September, estimates Romania has a 50% chance of the economy crawling on the border between recession and growth, with the GDP trend expected to range between -1% and Ă1%. Even worse, he believes there is a 25% probability of 2011 bringing a GDP decline of more than 1%, with external factors expected to play an important part in each scenario.