Fate of economy in 2011 depends on talks with IMF
Yesterday saw the start of two weeks of negotiations with the Fund, which are set to provide some answers to essential questions as far as next year is concerned.
Romania could find out in about two weeks' time if and how much
economic growth it will see next year, what the main taxes will
look like - flat rate, social contributions, VAT, what the new
arrangement to be signed with the IMF in spring will look like and
implicitly how big the RON/euro exchange rate volatility will
be.
The first official talks between the IMF's review mission and the
authorities began yesterday.
Jeffrey Franks, the mission chief, says the Fund's forecasts
regarding the Romanian economy could be adjusted, but not
significantly.
Forecast modifications have become a current practice over the
course of the arrangement sealed in the spring of 2009, with the
IMF so far only revising its calculations for the worse, after
failing to anticipate the economic trends. Now the Fund expects a
1.5% GDP growth for 2011.
The final forecasts will be an essential tool towards building next
year's budget. The draft that recently featured in the press but
has yet to be officially assumed is already suspected of
overestimating the revenue potential. Things are made even more
complicated by the chaos on the political scene, which was
reflected yesterday in the Parliament in the decisions on
introducing a 5% VAT rate on basic food items and on exempting from
taxation pensions of less than 2,000 RON, after there had been talk
of taxing all incomes of this type.
If these decisions are politically assumed, by the head of state
inclusively, attempts by the main ruling party PD-L to talk to the
IMF about cutting the flat rate to 12%, cutting overall social
contributions to 41% and increasing the minimum wage to 700 RON
will fail.