Romania’s public deficit eases by 1pp to 5.7% of GDP in 2022

The deficit of Romania’s general government budget edged up nominally by 1.4% YoY to RON 81 bln (EUR 16 bln), but the deficit-to-GDP ratio narrowed by more than 1pp to 5.7% (in line with the revised target) last year.

The revenues surged by 21%YoY to RON 470 bln (EUR 94 bln) in 2022, partly reflecting the rise in prices (VAT) and wages (social security contributions) – but also the transfers from the EU budget (under MFF 2014-2020). Notably, the “supplementary revenues from the energy sector” boosted the overall budget with some RON 13.7 bln (EUR 2.6 bln, nearly 1% of GDP) standing for supplementary dividends and other extraordinary taxes.

The expenditures faced conflicting effects of higher interest rates (larger public debt service) and tighter public payroll (only +5% YoY). They advanced by only 17.7% YoY to RON 541 bln (EUR 108 bln).

Separately, the energy subsidies paid for the winter season 2021-2022 account for only RON 7 bln – not much above half the supplementary revenues from the energy sector. Thus, the net effect of the ‘cap and subsidy’ scheme was a positive 0.5pp on the overall budget balance.

Notably, the public payroll rose by only 5.2% YoY, and as a share of GDP, it eased from 9.4% in 2021 to 8.2% in 2022.

On the downside, the public debt service rose by 62% YoY, and the debt service to GDP ratio increased from 1.5% to 2% (by 0.5% of GDP, roughly balancing the positive impact of the ‘cap and subsidy’ scheme).

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