Romania’s general government deficit hits 1.4% of GDP in Q1

Romania’s general government budget deficit soared by 45% y/y to RON 22.75 bln (EUR 4.5 bln) in the first quarter of the year (Q1). The deficit-to-GDP ratio increased from 1.1% in the same period last year to 1.4%.

The government seeks to bring the deficit down to 4.4% of GDP this year from 5.7% in 2022, but the Fiscal Council estimates that the ratio will remain at the same level (5.7%).

In Q1, total budget revenues increased by 9.7% and thus lagged behind the 15% average inflation, to RON 114.2 bln – a huge 13.1% below target. Most of the discrepancy against the target was caused by missed European funds (the RON 9.35 bln actual disbursements were less than half the target).

The revenues from the local economy (RON 104.8 bln, +9.6% y/y) were only 5.7% below the target. Thus, the budget revenues fell some RON 6 bln below target in Q1 compared to the RON 4 bln previously announced by the government.

The tax revenues increased by 7.9% y/y to RON 57.6 bln and were 7% less than planned. Subdues consumption and particularly 50% smaller than planned profit tax revenues (-44% y/y) were the main causes.

The expenses in Q1 increased by 14.3% y/y to RON 136.9 bln, 19.5% below plan. With fewer disbursements from the EU, the projects financed under the Resilience Mechanism and the national and EU budgets required less than half the money earmarked initially.

Notably, the interest on public debt was 18% below target despite the 58% y/y advance to RON 9.1 bln (0.6% of GDP, or an annualised 2.4% of GDP extrapolated for the whole year).

Capital expenditures (from the national budget) rose by 18% y/y, however, lagging significantly (-57%) behind the target.

(Photo source: Nuthawut Somsuk/Dreamstime.com)