Romania’s public deficit hits 3.55% of GDP in January-September

Romania’s general government budget increased by 35% y/y in nominal terms to RON 56.5 billion in January-September, the Ministry of Finance announced. The public deficit to GDP ratio reached 3.55%, from 2.96% in the same period last year.

The deficit to GDP ratio thus expanded by one-fifth (20%) since last year, in January-September, which seriously hinders even the revised full-year target (5.5% of GDP).

Last year, the public deficit reached 5.75% of GDP under national methodology (cash terms), while it was 6.2% under the European Union’s ESA methodology.

In January-September, the 0.6pp advance of the deficit-to-GDP ratio was predominantly (some two-thirds) the effect of disappointing revenues (only +11% /y) and higher expenditures (+13.7% y/y).

Thus, the revenues accounted for 23.1% of the full year’s projected GDP (from 23.5% in the same period last year), while the expenditures accounted for 26.7% of GDP (26.5% last year).

The revenues from excise duties and from windfall profit taxation of the energy companies advanced only marginally, given the lower energy prices this year. VAT revenues increased by only 8.8%, slower than consumer prices, which can hardly be explained even for the weaker (but positive) advance of private consumption.

On the expenditures side, nearly one-third (4.2pp) of the 13.7% advance of total public spending was prompted by capital expenditures or contributions to projects co-financed from the EU budget or the Resilience Facility. The social assistance and public payroll increased in the absence of needed reforms by 10% y/y and 11% y/y, and they contributed 3.5pp and 2.5pp, respectively, to the overall rise in public spending.

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