ING reduced Romania's 2010 economic growth forecast to 0.9%

ING Bank revised its prognosis for Romania’s economic growth in 2010 from 1.9% to 0.9%. The bank’s analysts expect the economic activity to contract in Q1, following unfavourable weather, an ING report shows.

„Severe weather conditions from the beginning of this year represent an important risk for the economic re-launch process. While January data showed that our fears are more than justified, the deterioration which carried on in February as well leads us to believe that Q1 has been a new contraction quarter”, the ING report reads.

ING analysts also show that the industrial output dropped both in January and in February. A similar situation is recorded in the construction and retail departments. Plus, they warn that the drop in VAT budget income by 20% indicates a low internal demand.

On top of that, reaching the quarterly target on budget deficit announced by Public Finance Ministry officials would have been obtained by banning some public spending.

Therefore, ING analysts estimate that the GDP will drop by 0.4% in Q1, revising their previous forecast that assumed a 0.5% increase. They also say that March data will indicate a significant improvement in several sectors in comparison to the past months, but this improvement is not going to be sufficient to compensate for the drops in the first two months.

The reassessment comes after the International Monetary Fund reduced Romania’s economic growth estimate for 2010 from 1.3% to 0.8%.