Romania Ctrl Bk Raises 2011 Inflation Forecast To 3.1%

Romania's central bank revised upward its inflation forecast for 2011 to 3.1% from the previous 2.8%, central bank governor Mugur Isarescu said Friday.

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The bank has already announced a significant revision of its forecast for this year's inflation, after the recent five percentage point increase in the value added tax level.

Romania's annual inflation is currently estimated at 7.8% to 8% for 2010, compared with the previous forecast of 3.7%.

The inflation might even rise above 8% by the end of this year, but it will decrease shortly after, Isarescu told a news conference Friday.

"By the end of 2011 ... the inflation will enter the variation interval, around 3%, and stay near that level," the governor said.

The forecast is based on current data and estimations that the second-round effects of the VAT increase will be modest, Isarescu added.

Romania's Government raised the VAT ratio from 19% to 24% starting with July 1, to boost revenue and keep the budget deficit below 6.8% of the gross domestic product.

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