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May 18, 2022

Franks, IMF: Increasing risk of a fresh recession wave next year

The head of the IMF mission to Romania, Jeffrey Franks said an interview with ‘Gandul’ newspaper that a risk of a new recession wave in Romania next year has increased, and the Fund will revise downwards its forecast of Romania’s economic growth, against the background of tensions abroad.

“The new forecast will certainly be under 3.5 pc. We will make this evaluation during the October visit,” Jeffrey Franks said. This would be the second revision, after the IMF lowered its forecast of Romania’s economic advance from 4.5 pc to 3.5 pc in its latest report on Global Economic Prospects.

“We are seeing a negative impact of tensions in Europe, which will be visible in a month or two, but this will be balanced by a good agricultural year. So, we keep our forecast for this year at 1.5 pc,” Franks added.

Speaking about the economic evolution in Q3, the IMF expert said that the data available so far are positive, but they do not take into consideration the recent market tensions. The risk of contagion from abroad has increased over the last three months in Romania, so pushing forward with the reforms provided by the IMF programme at an even faster pace is required in order to counter this risk, Mediafax reports.

In a different move, Romania will find it hard to meet its deficit target for this year and needs to make faster progress in increasing the absorption rate of EU funds, along with the reform of state companies, while the risks in the banking system must be carefully monitored, the First Deputy Managing Director of the International Monetary Fund (IMF), David Lipton warns in a press release.

The IMF Board approved Thursday the second evaluation of the new preventive accord and will make available for Romania a third installment worth EUR 495 M, taking the total sum available so far, in case of emergency, to EUR 1.06 bln. Romanian authorities announced they do not intend to draw money from this fund, the IMF informs.

According to Lipton, Romania made progress within the new agreement and met all the performance criteria agreed upon. The IMF official mentioned that, although the Romanian banking sector enjoys a good level of capitalisation, the situation in Europe generates risks that must be kept under close scrutiny.

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