The executive is betting on an economic growth of 1.5% this year, amid the continuation of the upward trend of exports, the gradual increase of domestic demand and the increased absorption rate of European funds. In the Letter of Intent published on the website of the IMF, the Romanian authorities show that inflation is forecasted to return within the band forecasted by the National Bank (NBR), after climbing to 8% at the end of 2010, on the back of the raise in VAT, as well as of the rise in the prices of foodstuffs and fuel.
The NBR stands by its commitment to cut the inflation target to 3% in 2011 and 2012. Even though over these past few months inflation has increased considerably, the members of the government are expecting it to fall in the second semester towards the target proposed by the NBR.
The current account deficit has decreased significantly, from 11.6% in 2008, to about 4.5% in 2010. In its letter, the Romanian government states that, in spite of the expected improvement of the economic indicators, Romania is still vulnerable and can be negatively influenced by the evolution of the international financial markets (higher borrowing risk, reduced capital inflows and a risk of a slowed down recovery of the Eurozone).
* Economic growth of 4-4.5% in 2012
According to the new precautionary agreement with the IMF, the members of the government estimate an economic growth of 4-4.5% in 2012. They have based their optimistic forecast on an increase in domestic consumption, which will once again become the engine for economic growth, but only with the added effect of a better absorption of European grants.
In order to reach these macroeconomic targets, the Government has committed to keep the deficit at 4.4%of the GDP in 2011, to keep the taxes unchanged, as well as to lower social security contributions, if the economy grows and t
