ECONOMY

In Brief

IMF to advise Romania to impose spending cuts BUCHAREST (Reuters) – The International Monetary Fund (IMF) will ask Romania to cut spending by around 1 percent of gross domestic product (GDP) this year to cap growth of the budget deficit, strained by deeper-than-expected recession, a source with knowledge of the talks said on Saturday. A mission of the Washington-based lender is in Bucharest until today to review the economic outlook and Romania’s progress in meeting conditions attached to a 20-billion-euro aid package agreed upon earlier this year. Finance Minister Gheorghe Pogea said on Friday the IMF has agreed to allow Bucharest to run a higher budget deficit of some 7 percent of gross domestic product this year in response to shrinking revenues. «The IMF has allowed a bigger deficit and has asked for a further reduction in spending… to ensure it is met,» an official close to the talks told Reuters. «Spending should be cut by around 1.4 percent of GDP. The figure is not final; it is still being negotiated.» A deeper-than-expected recession in the country of 22 million has slashed tax revenues, leaving Bucharest’s center-left government struggling to finance spending as the ruling parties vie for votes ahead of a presidential election. Bucharest expects this year’s economic contraction to rise to as much as 8.5 percent of gross domestic product, nearly double the IMF’s initial forecast. The deficit increase follows a similar agreement with Hungary which sought leniency from the Washington-based lender earlier this year to avoid further austerity measures. But the International Monetary Fund will continue to insist that the government enforce far-reaching reforms of its bloated, inefficient public sector, which employs about a third of the European Union state’s total work force. Air Arabia profits rise 10 pct, boosted by new destinations Air Arabia PJSC, the United Arab Emirates-based discount carrier, said second-quarter profit rose 10 percent as it added new destinations. Net income increased to 90 million dirhams (24.5 million US dollars) compared with 82 million dirhams in the year-earlier period, the company said on Saturday in an e-mailed statement. The airline launched a joint-venture company during the second quarter that operates from the carrier’s second hub in Casablanca and serves nine European cities, the company said. They also started operations to Goa, India, and Athens, Greece, from its main hub in Sharjah, one of the UAE’s seven sheikhdoms. (Bloomberg) Egyptian property Palm Hills Development SAE, an Egyptian real-estate developer, said reservation rates have exceeded cancellations in Q2 for the first time since the last three months of 2008, as construction in the Arab country defied the global recession. Reservations reached 348 units in the second quarter, while cancellations totaled 246 units, the Cairo-based company, which develops luxuries properties, said in a statement posted on its website. «The Egyptian real estate market has held up very well this quarter given the current economic climate,» the company said in the statement. Construction grew 16 percent in the first three months of 2009, helping the most populous Arab country’s economy to expand by 4.3 percent. (Bloomberg)