Romania’s budget deficit shrinks by 20% YoY to 1.6% of GDP in Jan-May

The general government budget posted a deficit of RON 20.9 bln (EUR 4 bln) in January-May, 20% smaller compared to the same period last year, Romania’s Ministry of Finance announced.

The public deficit-to-GDP ratio eased under 1.6% from over 2.2% in January-May 2021. The gap looks moderate not only compared to last year - but also compared to the full year’s 5.8%-of-GDP deficit target. But the trend should be taken with a bit of salt until full-quarter (Q2) budget data is released.

The budget revenues increased by 21.5% (RON 31.6 bln) to RON 179.0 bln in January-May, boosted by the robust VAT collections and dividend revenues. The net VAT revenues rose by 29.5% YoY (or with RON 8.7 bln in absolute terms) to RON 38.2 bln or 2.9% of the entire year’s projected GDP (up from 2.5% last year).

Private consumption has propelled the GDP in the first part of the year, and the retail sales will remain robust in nominal terms even if stagnating or even shrink in comparable prices - with the result of strong VAT revenues to the budget.

Another significant driver behind the strong budget revenues in January-May was the “non-fiscal revenues” - in this case, the dividends disbursed by (mainly energy) companies where the state is still a shareholder. The non-fiscal revenues increased by 60% YoY (or with RON 5.8 bln) to RON 15.5 bln (1.2% of the year’s GDP, up from 0.8% last year).

The public expenditures rose faster than the revenues, by 15.2% (or with RON 26.3 bln) YoY to RON 199.9 bln.

Social securities expenditures rose slightly faster than the average by 17.2% YmomsioY to RON 74.1 bln (5.6% of the year’s GDP, up from 5.3% last year).

Notably, the capital expenditures shrank by 4.1% YoY to only RON 8.2 bln (0.6% of the year’s GDP).

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