Successful completion of the first review of the new stand-by arrangement with the IMF

• IMF cut its forecast for 2012 economic growth to 3.7-4% from a previous 4-4.5%. The estimation for 2011 was maintained at 1.5%
• Inflation will rise above 5% in 2011
• NBR may need to change monetary policies in the coming months to reach the inflation target for the end of 2012 (3%±1pp)
• MinFin ready to issue EMTN in a month or so
• The recent appreciation of RON has been modest
• The government will begin the privatization and restructuring of companies in energy and transportation areas
• The liberalization of natural gas price will take place by 2013 for industrial consumers and by 2015 for households
• VAT reduction and other important tax cuts are possible only in the next 5-10 years in line with an improvement in tax collection. There is not enough fiscal space for a cut in taxes in 2012 given the need for a continuation of the fiscal consolidation efforts

Assessment: For the moment we maintain our key rate forecast of 6.25% in December 2011 and 6.75% in June 2012but acknowledge that the NBR could start earlier the monetary policy tightening cycle if inflationary pressures build up.

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