“We expect Serbia and Romania to press ahead with their precautionary programs over the course of next year, with Romania to draw funding from this and potentially request an increase in the size of the program,” UniCredit said in its latest CEE quarterly report.
The Italian bank revised down its forecast on Romanian growth to 1.4% in 2012, from 2.5% previously, saying it expects agriculture to affect growth in the second half through a base effect. The growth forecast for 2013 was also cut to 2.5%, from 3.1%.
UniCredit said Romania’s 2012 budget deficit target of 1.9% of the gross domestic product looks ambitious and difficult to finance at “reasonable costs.” The bank estimates a budget gap of 2.5% of GDP, financed by drawing EUR2.5 billion from the IMF and the World Bank.
“Our view on budget financing is based on partial rollovers of public debt by foreign investors and local banks and on the expectation that foreign markets will not be tapped in 1H12, when the equivalent of EUR4.9 billion in locally issued RON debt will mature,” the report noted.
Romania and the IMF signed in March a EUR3.6 billion two-year precautionary facility, successor to a EUR20 billion bailout package received during 2009-2011. The new deal also includes EUR1.4 billion financing from the European Union and a EUR400 loan from the World Bank.
So far, the IMF approved total financing to Romania worth around EUR1.6 billion under the new arrangement, but the authorities in Bucharest have not accessed any funds.