Romania’s public deficit, already up 60% y/y before Covid-19

Romania’s public deficit increased to RON 8.3 billion (EUR 1.7 bln) in the first two months of this year, according to the data published by the Finance Ministry.

The deficit recorded in January and February accounts for 0.73% of the GDP projected for the full year, before the Covid-19 crisis hit.

However, as the GDP is likely to drop this year compared to 2019 rather than increase, as the Government expected when it approved the budget for 2020, the deficit in the first two months is even higher as a share of this year’s probable GDP.

The budget revenues increased by 9.8% year-on-year in the first two months, to RON 51.3 bln (EUR 10.7 bln), while expenditures increased by 14.8%, to RON 59.6 bln (EUR 12.4 bln).

On the revenues side, net VAT collection increased by only 6.7% year-on-year.

The profit tax notably contracted by 21.4% (which is not entirely relevant since large companies have not reported their 2019 results yet) while the income tax surged by 16.2% and the social security contributions increased by 11.2%.

On the expenditures’ side, public payroll increased below average, by 9.9%, but the social security expenditures soared by 16% and accounted for RON 22.2 bln (EUR 4.6 bln) - advancing to 37.2% of total revenues in January-February, up from 36.9% in the same period last year.

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