Update on Romania’s budget

Over half of Romana's budget deficit in the first nine months was generated by anti-COVID measures

Daniela Budu, 28.10.2020, 13:50

Finance Minister Florin Cîţu on Tuesday announced Romania’s budget
deficit in the first nine months of the year has exceeded 6% of the GDP,
tantamount to some €13.7 billion, which is half the value reported last year.
The Romanian and global economies are undergoing the most severe crisis
they’ve seen in the last 100 years. This is not just me saying this, but every
expert keeping an eye on the global economy. Yet more and more experts have
confirmed that Romania will overcome this period a lot better than analysts,
the European Commissions and others estimated. The return to economic growth
has been confirmed by a number of economic indicators, Finance Minister Florin
Cîţu told an online press conference. The Romanian official explained what
generated the high budget deficit:

Half the deficit recorded so far, namely 3.5% of the GDP, accounts for
funds that remained with economic agencies by means of tax breaks, investments,
exceptional expenses incurred to combat the economic fallout of COVID-19. Some
tax obligations were postponed, and VAT returns were higher compared to the
period January-September 2019. Interest rates for the payment of tax on profit on
due date represented €116 million. At
the same time investments were by €1.4 billion higher than last year. Of
course, there were also exceptional payments generated by the COVID-19 crisis,
which represented some €2.11 billion. Without these expenses the deficit would
have been lower, but it wouldn’t have benefited the economy.

As regards COVID-related payments, part of them are linked to active
measures such as furlough and the payment of 50% of gross salary rights to
employees. According to the Finance Minister, over €6 billion was earmarked for
investment, of which a third represented non-reimbursable external funds. The
targeted sectors were transports, defense, public works, health care, the
environment and agriculture. As regards payments, Florin Cîţu said some €224 million account for additional funds made
available after pensions were increased on September 1. Bonuses and services
stood around the same mark, consisting of drugs and medical equipment.
According to official estimates, the budget deficit will climb to 8.6% of te
GDP at the end of the year, half of which is strictly linked to the
coronacrisis.

(Translated by V. Palcu)