Romania’s consolidated budget revenues dropped by 2.4% in the first seven months of the year compared to the same period last year. The state collected some EUR 28.8 billion between January and July, representing some 17.1% of the gross domestic product (GDP) estimated for this year, according to the Finance Ministry.

The VAT revenues, which used to have the highest share in the state’s tax revenues, went down by 10.1% compared to the first seven months of 2015, to EUR 6.79 billion. The drop was due to the general VAT rate cut from 24% to 20% starting January 1, 2016, and the VAT rate cut on food from 24% to 9% starting June 1, 2015, The Finance Ministry explained.

Romania also received significantly lower payments from the European Union (EU) in the first seven months of this year compared to the same period of 2015, the official budget execution shows.

However, the state collected more money from the tax on corporate profits (EUR 2.34 bln, +10.5% year on year), from the individual income tax (EUR 3.49 bln, +2.8% yoy), and from the social security contributions (EUR 7.73 bln, +6.6% yoy).

While the revenues went down, the state’s expenses increased by 4.7% in the first seven months, reaching EUR 29.3 billion. The state’s personnel expenses went up by 10.2%, to EUR 7.27 billion, reflecting the wage increases in the public sector. The welfare expenses also rose by 7.9%, to EUR 10.46 billion.

Romania also increased its capital expenditure (EUR 1.38 billion, +23% year-on-year) and spent more money financing projects selected for EU funding. The money spent for these projects should be recovered from the European Union.

After the first seven months, Romania recorded a budget deficit of some EUR 387 million, or 0.2% of its GDP, compared to a budget surplus of EUR 1.67 billion (1.04% of GDP) in the same period of last year.

editor@romania-insider.com