Romania’s budget deficit climbs to 4.7% of GDP in first seven months

Romania recorded a consolidated budget deficit of RON 49.7 bln (EUR 10.3 bln) in the first seven months of this year, 2.8 times higher than in the same period of 2019.

The deficit thus reached 4.7% of the gross domestic product (GDP) estimated for this year, up from 1.71% in the same period of last year.

The Finance Ministry says that more than half of the budget deficit, namely some RON 27 bln (EUR 5.6 bln) or 2.55% for the GDP, represents the money pumped into the economy though fiscal stimuli, investments and exceptional expenses for combatting the effects of the COVID-19 pandemic.

The total budget revenues in the first seven months were RON 175 bln (EUR 36.2 bln), down by 2.7% compared to the same period of 2019, as the tax revenues went down by 5.1% to RON 83.9 bln (EUR 17.37 bln), and social contributions were flat at RON 64.8 bln (EUR 13.4 bln). VAT revenues contracted by 16.4%, reflecting a significant drop in consumption.

The revenues from the tax on corporate profits also dropped by 14.8%. Meanwhile, the revenues from the tax on salaries and individual revenues went up by 6.5% years-on-year.

Meanwhile, the total expenses increased by 13.4% year-on-year to RON 224.8 bln (EUR 46.5 bln). The state’s personnel expenses went up by 5.7%, while the spending on goods and services increased by 15%.

The Government also had 20% higher interest costs as it borrowed more to cover the growing budget deficit. The expenses with social assistance went up by 22.4%.

The Government allotted RON 4.6 bln more than in January-July 2019 for investments and recorded extraordinary expenses worth RON 6.56 bln related to the COVID-19 pandemic, according to the Finance Ministry’s report.

The Government expects a budget deficit of 8.6% of GDP this year, based on an estimated GDP contraction of 3.8% compared to 2019, according to the recent budget amendment adopted in early August.

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