Romania's Govt. budget deficit widens by 80% to 1.4% of GDP in Jan-May

Romania’s general government budget deficit widened by 80% year-on-year to RON 14.7 billion (EUR 3.1 bln) in January-May. It amounted to 1.43% of the GDP projected for the whole year, compared to 0.86% of GDP in the same period last year and a full-year target of 2.76% of GDP. The deficit thus nearly doubled from last year and exceeded the full-year target.

Further threats to the fiscal stability come from the new pension law, which is still awaiting promulgation by the president after being passed by lawmakers. In the short term, the rise in pensions will add RON 8 billion (0.8% of GDP) to the state’s pension expenditures this year and RON 25 billion (2.3% of GDP) in 2020, according to the government’s projections.

The public expenditures in January-May, pushed up by public payroll (+25% y/y) and social security expenditures (+15% y/y), advanced faster than revenues: by 16.3% compared to the 11.6% y/y advance of the revenues. The payroll plus social security expenditures hit 65% of total expenditures in the period, up from 62.3% in the same period last year.

On the revenues side, the stronger VAT collections (+12.8%, 20% of total revenues) and social security contributions (+18.5% y/y, 36.9% of total revenues) could not push up the overall performance at a rate high enough to match the rising financing needs.

The transfers from the EU budget remained roughly constant in nominal terms at RON 6 billion but decreased as a share of the period’s revenues (to 4.8%) and the year’s GDP (0.6%).

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