“Economic activity is now stabilizing and we expect growth of 1.5-2 percent in 2011 (compared to around -2 percent in 2010). Headline inflation has jumped in recent months due to the effects of the necessary July VAT increase and food price pressures. We expect inflation to peak at slightly above 8 percent at end 2010 before returning within the National Bank of Romania’s target range in the course of 2011. We project a current account deficit of 5-6 percent of GDP for 2010.” The statement was made by Jeffrey Franks, International Monetary Fund (IMF) mission chief for Romania at the end of the visit which ended today.
According to him, the tough but necessary fiscal measures taken earlier this year are reducing Romania’s fiscal imbalances and helping to ensure macroeconomic stability, and Romania should be adequate to ensure that the 2010 budget deficit target (6.8 percent of GDP) will be met.
However, spending pressures–particularly in health and social assistance programs–still need to be addressed, and improvements in tax collection remain a challenge.
“We have agreed with the government on the main components of a 2011 budget which should produce a deficit of 4.4 percent of GDP (in cash terms). We have also agreed on a timetable for action on key structural reforms, including approval of the new unitary public pay law and the enactment of the pension law,” said Franks.
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