Romania sees 5.7% drop in budget revenues as expenses go up 3.5% in January

Romania’s consolidated budget revenues went down by 5.7% in January 2017 compared to the same month of 2016, to RON 19.2 billion (EUR 4.27 billion), according to official data released by the Finance Ministry. Meanwhile, the state’s consolidated expenses went up by 3.5% year-on-year, to RON 16.2 billion (EUR 3.6 billion). This is a bad signal for the new Government’ whose budget for 2017 relies on a 13.8% increase in revenues compared to 2016. The PSD-ALDE cabinet led by Sorin Grindeanu also estimates a 15.2% increase in the state’s expenses this year and a budget deficit of just under 3% of the GDP. However, many economists have warned that the budget is over-optimistic while the European Commission expects Romania’s budget deficit to reach 3.6% of the GDP this year, according to a recently published report. The Finance Ministry explained that the drop in revenues in January was mainly due to a 25% drop in VAT revenues compared to the first month of 2016, to RON 5.24 billion, as a result of the VAT rate cut from 24% to 20%, on January 1, 2016, which was reflected in the budget revenues starting February 2016. The value-added tax (VAT) is the most important source of revenues to the state budget. The state’s revenues from the tax on corporate profits also went down by 35% in January, to RON 292 million. Meanwhile, the state saw higher revenues from the taxes on individual income, which went up by 25%, to RON 2.84 billion. The social security contributions also went up by 9.4%, to RON 5.57 billion. Both revenue sources were positively influenced by the salary increases in Romania in the past year, both in the public sector and the private sector. On the expenses side, the state saw a 9.5% increase in welfare spending, to RON 7.14 billion, mainly due to the increase in pensions starting January 1, 2017. The state’s personnel expenses also increased by 8.2%, to RON 5.16 billion. The acquisitions of goods and services went down by 7.4%, to RON 1.81 billion, and the capital expenses dropped by 30%, to RON 220 million. The Ministry of Finance reported a budget surplus of some RON 3 billion, or 0.37% of GDP, in January, down from 4.7 billion in the same month of 2016. editor@romania-insider.com