IMF To Maintain Romania’s 2010 GDP Forecast

The IMF will not significantly alter its forecast on Romania’s 2010 GDP, expected to see a 0.5% decrease this year, following the recently announced VAT hike and public sector wage cut, IMF mission head to Romania Jeffrey Franks told MEDIAFAX.

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IMF experts will analyze new data and determine whether the estimate needs to be amended during the upcoming valuation mission, expected in Bucharest in late July.

Franks said the IMF will also maintain its positive outlook on the Romanian economy for 2011, and its estimate regarding quarterly economic growth, which institution experts expect to see before the end of the year. The mission head explained that the VAT spike is not expected to negatively impact the economy.

Franks also said that the situation would have been better, had Romania afforded fiscal incentives in the early stages of the recession.

The IMF representative said the institution's managing board was impressed with the speed with which the Romanian Government managed to replace the proposed pension cut, ruled unconstitutional by the Constitutional Court. Franks highlighted the fact that the IMF had suggested a VAT increase during its previous mission to Bucharest.

The IMF mission head deemed the current austerity measure plan balanced, as it increases population income by 1% of the GDP and cuts public expenditure by 1,3% of the GDP.

The IMF approved Friday the disbursement of approximately EUR900 million to Romania, following a new review of the country's performance under a EUR13 billion standby agreement. The board also accepted a third waiver of non-observance of the performance criterion pertaining to Romania's general government domestic arrears.

Romania and the IMF agreed last spring on a EUR13 billion loan, as part of a larger EUR20 billion aid package that includes funds from the European Commission, the World Bank and other international lenders. So far, Romania has received around EUR9.2 billion in IMF money and another EUR2.5 billion from the Commission.

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