New round of talks with IMF starts from 0.5% GDP decline scenario in 2011

Romania will start a new round of talks with the IMF and the European Commission on Monday, with the spectre of the third year of recession in a row looming, as the GDP could go down by 0.5% in 2011, official sources say.

After the 7% decline in 2009, the revised contraction forecast considered for 2010 ranges from 1.5% to 1.8% of GDP.

The new estimate is already regarded as optimistic considering many analysts working for banks see the decline at 3%. This spring, the IMF had anticipated that the Romanian economy would “take off” in 2011 and grow by 5.1%, yet even the calculations of the institution in Washington continue to be upset by reality.

The letter of intent that the Romanian authorities sent to the IMF management on June 16 was built around a zero or slightly negative economic growth scenario. After the VAT hike to 24%, the Finance Ministry started to consider an at least 1.5% drop.

Catalin Pauna, the World Bank’s chief economist in Romania, however, sees the visible slowdown of the economic decline compared with last year as a good thing.

“The economic contraction in 2010 will be much lower than in 2009. Romania is slowly recovering. It is emerging out of the economic crisis. The GDP adjustment will follow a slightly downward trend.”