Romania’s budget deficit widens by one third to 1.9% of GDP in Jan-Jun

Romania’s consolidated budget deficit reached nearly RON 20 billion (EUR 4.2 bln) in January-June, one third larger than in the same period last year.

The deficit in the first half was 1.94% of the GDP projected for the whole year compared to 1.58% of GDP in the first half of last year.

The Finance Ministry has already announced that a set of corrective measures would be passed along the budget revision in early August, to keep the year’s deficit under 3% of GDP.

The revenues increased by 12.6% year-on-year to RON 148.6 bln (EUR 431.3 bln) or 14.4% of the year’s projected GDP, compared to 14% of GDP in the same period last year. Nearly half of the increase in the revenues came from social security contributions (+17.1% year-on-year) driven by rising wages.

The budget expenditures increased by 14.7% year-on-year to RON 168.6 bln (EUR 35.5 bln), or 16.4% of the year’s projected GDP, up from 15.6% of GDP last year. Expenditures were driven up by the higher public payroll (+23.4% y/y) and social security spending (+14.8% y/y), which altogether accounted for 71% of the rise in the overall expenditures.

The deficit partly rose because of a higher volume of funds transferred from the state budget to EU-funded projects not matched by the same volume of funds disbursed from the EU budget. However, this payment in advance accounted for only RON 490 mln, or 0.05% of year’s projected GDP, compared to the 0.35%-of-GDP expansion of the deficit in H1 compared to the same period last year.

The Government’s public capital expenditures increased by 12.3% year-on-year, to RON 7.9 bln (EUR 1.66 bln). The increase accounted for only 4% of the overall advance of the public expenditures or 0.08% of GDP (out of the 0.35% of GDP rise in the deficit-to-GDP ratio).

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