Romania's public deficit widens to 8% of GDP in Jan-Nov

Romania's public deficit increased 2.3 times to RON 84.0 billion (EUR 17.3 bln), or 8% of GDP, in January-November 2020. The Government targets a 9.1%-of-GDP deficit for the whole year and plans to lower the gap to 7% of GDP in 2021.

Out of the total 8% of GDP deficit in the first eleven months of the year, RON 43.7 bln (EUR 9 bln), or nearly 4.2% of GDP, was the impact of the measures taken to mitigate the effects of the coronavirus, the Finance Ministry explained in a note.

However, nearly half of the impact (RON 19.1 bln) consists of budget payments deferred by companies - most of which are supposed to be paid in 2021, including under schedules agreed with the authorities. The Government thus expects to cash these receivables by the end of 2021.

The bonuses extended to those taxpayers who paid their dues on time were only RON 0.8 bln.

The Government said it invested RON 8 bln more than in the same period of 2019 - and assigned this to the set of measures related to the coronavirus as well. The Executive also sped up the VAT refunds with a net impact of RON 1.9 bln on the cash flow related to the VAT in the first eleven months of the year - a move also said to support the economy although it can hardly be seen as related to the crisis.

The Government's spending specifically for coronavirus measures (equipment) was RON 13.8 bln (1.3% of GDP), one-third of the total impact of all the measures related to the coronavirus crisis.

Another real expenditure of the Government related to the coronavirus crisis is not mentioned since it was not incurred yet in terms of cash flow - and this is the (deferred) budget payments owed by the companies that will go bankrupt in 2021.

The budget revenues in January-November increased marginally to RON 290.6 bln (EUR 59.9 bln), 0.4% more than in the same period of 2019. As a share of GDP, the revenues inched up to 27.7% from 27.3%. However, the tax revenues shrank by 4% to RON 137.0 bln as the net VAT collections dropped by 9.5% year-on-year to RON 53.4 bln. The transfers from the European Union's budget are reported to have soared by one-third (or RON 6.9 bln, EUR 1.4 bln) to RON 27 bln (EUR 5.5 bln) in the eleven months.

The expenditures in January-November increased by nearly 15% year-on-year to RON 374.7 bln (EUR 76.9 bln). The rise of social security expenditures and public payroll (+22% and +7%, respectively) explains two-thirds of the increase in public spending in the period. Thus, the social security expenditures soared by RON 23.2 bln to RON 128 bln, and the public payroll rose by RON 6.6 bln to nearly RON 100 bln. The capital investments increased significantly by 10.5%, but this accounted for only a RON 2.2 bln increase compared to the same period of 2019. The Government also spent more to co-finance EU-funded projects: 27.5% more than in the same period of 2019, namely an increase of RON 6.0 bln that, besides capital expenditures, sum up to the RON 8.0 bln stronger public investments announced by the Finance Ministry.