Romania 2Q09 GDP turned out in line with expectations: * 2Q09 GDP -8.8%y/y vs -8.8% espected and -6.2% in 1Q09 This is a flash estimate. The statistical office will release GDP components and the second estimate on 1 September. Our view We assume that domestic demand and in particular household consumption caused the deterioration in GDP growth, while net exports partly offset weaker domestic demand. Second quarter GDP supports the case for monetary easing in our opinion. The central bank seems concerned that too aggressive rate cuts could weaken the RON. On a positive note, the government has been able to negotiate a new budget deficit target with the IMF, which implies that the IMF (and the EU) are confident that spending cuts and fiscal reforms will be implemented. The NBR is scheduled to hold its next policy meeting on 29-Sep and we expect a 50bp rate cut.