Romania’s GDP Decline Seen Wider In 2010 Due To VAT Hike, Floods – PM

Boc stressed, however, that Romanian authorities and experts with the International Monetary Fund and the European Commission see the Romanian economy recovering in 2011.

Boc reiterated that IMF and EC experts did not request further increases in the value added tax or the flat tax rate during talks with Romanian authorities this week.

Finance Minister Sebastian Vladescu said Friday that talks between Romanian authorities and the IMF's mission don't include further tax increases for the country, either this year or in 2011. The IMF's mission "doesn't change anything" regarding Romania's taxes and duties, Vladescu told reporters.

End June this year, Romania's government raised the VAT level to 24% from 19%, a move aimed at compensating the annulment in court of a 15% cut in pensions and ensuring the continuity of its EUR13 billion loan agreement with the IMF. The VAT hike is part of the Government's austerity pack aimed at boosting revenue and reducing the budget deficit.

According to analysts, the IMF could ask for further budgetary adjustments by yearend so that Romania can reach its budget deficit target of 6.8% of the gross domestic product for 2010.

Joint teams from the IMF and the European Commission will be in Bucharest until August 4 to review Romania's progress under a EUR20 billion loan package.

Following the mission, the IMF will decide whether to disburse a sixth loan installment to the country, worth over EUR900 million.

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