Yesterday saw the start of two weeks of negotiations with theFund, which are set to provide some answers to essential questionsas far as next year is concerned.
Romania could find out in about two weeks' time if and how mucheconomic growth it will see next year, what the main taxes willlook like - flat rate, social contributions, VAT, what the newarrangement to be signed with the IMF in spring will look like andimplicitly how big the RON/euro exchange rate volatility willbe.
The first official talks between the IMF's review mission and theauthorities began yesterday.
Jeffrey Franks, the mission chief, says the Fund's forecastsregarding the Romanian economy could be adjusted, but notsignificantly.
Forecast modifications have become a current practice over thecourse of the arrangement sealed in the spring of 2009, with theIMF so far only revising its calculations for the worse, afterfailing to anticipate the economic trends. Now the Fund expects a1.5% GDP growth for 2011.
The final forecasts will be an essential tool towards building nextyear's budget. The draft that recently featured in the press buthas yet to be officially assumed is already suspected ofoverestimating the revenue potential. Things are made even morecomplicated by the chaos on the political scene, which wasreflected yesterday in the Parliament in the decisions onintroducing a 5% VAT rate on basic food items and on exempting fromtaxation pensions of less than 2,000 RON, after there had been talkof taxing all incomes of this type.
If these decisions are politically assumed, by the head of stateinclusively, attempts by the main ruling party PD-L to talk to theIMF about cutting the flat rate to 12%, cutting overall socialcontributions to 41% and increasing the minimum wage to 700 RONwill fail.
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