Romania reports “smaller than planned” public deficit in H1
Romania's public deficit in the first half of the year (H1) soared to RON 45.1 billion (EUR 9.4 bln), 126% more than in the same period last year. The deficit to GDP ratio rose to 4.2% of GDP from 1.9% in H1 last year.
"More than half of the deficit, namely RON 23 bln or 2.13% of GDP, represents the amounts left in the economy through fiscal facilities and exceptional expenditures adopted to mitigate the effects of the COVID-19 epidemic," the Finance Ministry said in a press release.
The revenues decreased by 1.6% year-on-year to RON 146.3 bln (EUR 30.2 bln) dragged down by the 16% lower net VAT collection (-RON 4.76 bln, or nearly EUR 1 bln).
Some RON 10.2 bln worth of corporate taxes were deferred, and RON 2.94 bln of VAT was reimbursed in advance to companies - both measures aimed at preventing a liquidity crisis in the real sector, the ministry explained.
In contrast, expenditures rose by 13.6% year-on-year to RON 191.4 bln (EUR 39.6 bln) pushed up by 24% higher social assistance expenditures (+RON 13.3 bln or EUR 2.7 bln). The expenditures related to COVID-19 were RON 5.86 bln, and the public investments increased by RON 3.79 bln.
For the whole of 2020, the Government envisages a 6.7%-of-GDP budget deficit. The H1 deficit is smaller than planned, finance minister Florin Citu said on July 27, just before the official release, Agerpres reported.
The H1 budget execution is one of the key elements to be considered when the Government will decide on the percentages for increasing pensions and child allowances. In principle, the "lower than planned gap" is not enough to support doubling the child allowances and hiking pensions by 40%, as set by law. Still, it's enough for the opposition to put the Government under increased pressure in the electoral context.
At the same time, a budget revision is expected to follow based on the H1 figures. All three major rating agencies expect to see corrective measures to keep the country's rating in the investment-grade area.