Food, Energy Prices Pose Risks On Romania's 2011 Inflation - IMF

Romania's central bank targets an inflation rate of 3% plus/minus one percentage point this year, compared with 8% in 2010.

The central bank's target is "still likely to be met," the IMF said, noting however that "upside risks to the inflation outlook outweigh downside ones."

"A continued resurgence in world commodity prices may increase food and energy prices by more than currently expected. The need to raise administered prices as part of a more aggressive adjustment process in some public enterprises may also boost inflation," the fund said in its report.

Also, a further weakening of the leu would also put pressure on the consumer price index.

"On the downside, the wide output gap could lead to a smaller-than-projected pass through of the VAT increase," the IMF also said.

Romania's annual inflation rose to 8% in December, from 4.7% at the end of 2009, fueled by price increases caused by a five percentage point increase of the value added tax in early July.

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