VAT hike: Between saving the budget and disappointment of prolonged recession

The slowing growth pace of VAT revenues towards yearend is casting a shadow of doubt on the way the 24% hiked VAT, which saved the budgetary gap last year, will help the budget in 2011 as well, considering the ambitious target of narrowing the deficit to 4.4% of GDP.
The Finance Ministry for this year projects VAT revenues worth 43.1%, 10% above the sums collected last year.
In December, the growth pace of sums collected from VAT almost halved against November, being the most sluggish advance registered after the decision to lift the rate by 5%.
Finance Minister Gheorghe Ialomițianu yesterday started VAT revenues covered the payment of arrears and made it possible for the budgetary gap target to be hit at the end of 2010, maintaining the IMF and the European Commission welcomed the “very good” results Romania obtained as part of the standby agreement.
However, the IMF has one big disappointment after two years, namely that the economy has not returned to growth, yet.
Some analysts stated that had the VAT not been hiked, there would have been chances for the economy to resume growth.