Romania’s Government closed the first seven months of the year with a budget deficit of RON 18.1 billion (EUR 3.8 bln), or 1.76% of the GDP projected for the full year.

The deficit has narrowed from nearly RON 20 bln (1.94% of GDP) in January-June, but this reflects a seasonal pattern caused by companies paying quarterly dues (profit tax mainly) for the second quarter of the year.

Last year, the year-to-date budget deficit also narrowed by 0.22% of GDP in July, while this year the improvement (monthly surplus) was only 0.18% of GDP.

The budget deficit for the whole January-July period widened by 52% compared to the same period last year. The revenues increased by 12% year on year to RON 180.1 bln (EUR 38.3 bln), while expenditures rose by 14.7% year on year to RON 198.2 bln (EUR 42.2 bln).

The Government targets 2.76% of-GDP budget deficit this year, but any figure below 3% of GDP would be acceptable as the independent projections put the gap rather around 3.5% of GDP.

Since the public debt is not far from 35% of GDP, this does not pose imminent threats, but higher financing costs amid risk-adverse sentiment could put additional pressures on the fiscal space left for large infrastructure projects, which are more problematic (given their repeated delays) than the rising deficit or public debt.

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editor@romania-insider.com