Romania’s public deficit shrinks to under 1.3% of GDP in Q1

Romania's budget deficit contracted by 19% year-on-year to RON 1.14 billion (EUR 230 mln) in the first quarter of the year (Q1) as the taxpayers (mainly companies) paid a significant part of the taxes deferred during 2020.

The companies and natural persons were allowed to defer (and later reschedule) their dues to the state budget during 2020. The Government offered this facility immediately after the state of emergency was declared on March 16, 2020.

Out of the RON 18.1 billion (over EUR 3.6 bln) tax credit thus extended by the Government, mostly to firms, in 2020, RON 5.36 bln (EUR 1.1 bln, nearly 0.5% of the year's projected GDP) was already paid in the first quarter of the year (Q1) - visibly pushing up the revenues and sweetening the public deficit figures.

The effect of deferred taxes will continue throughout the entire year, but at a much smaller intensity as only RON 10 bln (assuming 100% compliance with restructuring schedule) are still to be paid during the coming three quarters, compared to RON 5.36 bln paid in Q1.

Separately, the Government says that it spent just over RON 6.0 bln (EUR 1.22 bln, 0.53% of GDP) in COVID-19 related expenditures and supplementary investments (aimed at consolidating the economy that faces a deep economic crisis).

Romania's budget revenues increased by 18.9% year-on-year to RON 85.8 bln (EUR 17.5 bln) in Q1. The net VAT and corporate tax collections soared by 35-40%, or RON 5.7 bln (EUR 1.16 bln), compared to the same period last year - a figure that largely matches the companies' deferred dues to budget.

The budget expenditures increased by 11.2% year-on-year to RON 100.4 bln (EUR 20.5 bln). The nominal RON 10 bln yoy increase matches the additional spending (RON 6 bln) invoked by the Government.

The public payroll rose by 5.8% (RON 1.5bln, EUR 300 mln) - at a moderate pace by historical standards. The Government's capital spending rose by 36.7% yoy (+RON 1.2 bln), but the biggest contribution to the 11.2% overall rise in public spending came from social security: +16.5% yoy (or +5.4 bln).

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