Disquieting Budget Figures

The Romanian Finance Minister Thursday night presented a report on the public budget

Corina Cristea, 27.07.2018, 12:32

Romanias consolidated budget deficit stood at roughly 3.2 billion Euros in the first half of the year, accounting for 1.61% of the GDP. The deficit is twice as big as in the first six months of 2017, but remains below the level forecast by the government of 2.21% of the GDP. The figures have been made public by the Finance Ministry, which explained that in the first half of the year budget revenues were 13% higher, but expenditure grew significantly, at a 19% higher rate than in the same period of 2017.

The data published by the Finance Ministry shows that revenues from social security contributions grew by 37%. The Ministry has also noted that the month of June saw an improved VAT collection rate, which also rose by over 15% as compared to the same month last year, but that on the other hand revenues from income and salary taxes went down by almost 22% against a reduced tax rate, from 16% to 10%. According to the same data, payroll expenditures saw the highest increase, by over 24% as compared to the first half of 2017, a situation caused by the pay rises granted to public employees. Expenses incurred for the procurement of products and services also went up by 10%, and the social assistance costs have also been significantly higher.

Investment expenditure, which includes capital investments as well as expenses for development programmes funded from domestic and foreign sources, stood at 9.1 billion lei, 1.5 higher than the same period last year. A month ago, Ionut Dumitru, chair of the Fiscal Council, cautioned that the budget deficit in the first five months of the year is very big, being, first and foremost, the outcome of higher expenses. According to him, unless measures are taken the deficit could reach 3.5 – 3.6% of the GDP at the end of the year. According to the economic forecasts made public by the European Commission in mid-July, the budget deficit could reach 3.4% of the GDP in 2018 and make it to 3.8% in 2019.

In another development, deputy Prime Minister Viorel Stefan has recently said that the budget deficit for 2018 will certainly be under the 3% ceiling specified in the EU treaties, and that the adjustment of the structural deficit with a view to meeting the mid-term objective is planned to begin in 2019.

(translated by: Daniel Bilt)