From budget deficit to social measures

Romania’s budget deficit in the first four months of the year stays around 11.6 billion Euros

Corina Cristea, 28.05.2024, 12:59

The government has no easy task this year, which is an election year in Romania: They have to come up with financial solutions in a country that has for years registered an excessive budget deficit. Rules must be obeyed in order not to attract the attention of Brussels who is closely monitoring the situation and the government’s attempt to find a common denominator between these rules and the good functioning of the country led to the construction of a budget with a deficit of 5% of the GDP this year, lower than last year when it stood at 5.68%.

Data released by the Finance Ministry show that in the first four months of the year, the budget deficit has gone up to 3.24% of the GDP, 2% more than in the same period last year.

The state reported 37 billion Euros in revenues 15% higher on an annual average, including from the VAT, income and profit taxes. Expenses were also on the rise by 29%, mainly due to pay rises, social assistance, goods and services, the amount standing at roughly 48 billion Euros.

According to field ministry, the deficit in April was influenced by the payment in advance of the 1.8 billion Euros in pensions before the mini-holiday on Easter and May 1.

The government’s focus must remain steady all the more so as Romania will have to align to the European directive on the minimum gross wages, which says that the employees in low income brackets will have to receive at least half of the medium salary.

Raising the minimum wages in Romania to 740 Euros from the initial sum of 660 Euros is high on the government agenda this week.

The measure was decided by the ruling PSD-PNL coalition, which has also proposed a 20% cap on trade markup for products made in Romania. The government is expected to endorse the measure in the following period of time. Here is Romania’s Prime Minister Marcel Ciolacu.

Marcel Ciolacu: “That concept has already been implemented in France with the same purpose, namely to protect the local producers. In Romania we do not have a majority retail system with Romanian capital, like they have in Poland, for instance. So, you have to find solutions to protect the local producers because the retailer can impose some trade markups.”

The PSD and PNL have also tackled ways of curbing budget expenses by limiting them to bare necessities until the first budget adjustment this year.

(bill)