Romanian economy expected to shrink 2% this year, back on the up next year

Romania's economy is expected to shrink two percent in 2010 and will increase between 1.5 and 2 percent in 2011, reads the additional letter of intent to the International Monetary Fund (IMF) approved by the Government. "The economic recovery will be delayed due to persisting low domestic demand, the unfavorable regional context and the recent floods," reads the document. Inflation is expected to temporarily rise in the last two quarters of the year under the effect of the VAT increase, hitting 7-8 percent by the end of 2010, before reverting in 2011 to the variation band targeted by the Romanian Central Bank (BNR). The current account deficit is further projected at 5 percent of the gross domestic product (GDP). AGERPRES