Romania’s budget deficit reaches 0.5% of GDP in the first half of 2016

Romania’s consolidated state budget recorded a EUR 855 million, or 0.5% of the GDP, in the first half of this year. The deficit is lower than the one programmed for the period, which was 1.9% of the GDP. In the first six months of last year, Romania had a budget surplus of EUR 930 million, or 0.6% of the GDP. The state’s total revenues went down by 2% year-on-year, to EUR 24.08 billion, while the expenses increased by 5.5%, to EUR 24.94 billion, according to official data released by the Finance Ministry. The revenue decline was mainly determined by the drop in EU funds Romania received in the first half of 2016 for finalized projects. The EU paid Romania little over EUR 100 million, down from EUR 880 million in the first half of 2015, as several EU-funded projects from the 2007-2013 budgeting period have been finalized. However, Romania hasn’t drawn any EU funds from the 2014-2020 budgeting period yet. The lower revenues were also related to the VAT cuts. The VAT rate on food was cut from 24% to 9% in June 2015 and the general VAT rate went down from 24% to 20% in January 2016. Thus, the VAT revenues went down by 9.5% in the first half of 2016, to EUR 5.87 billion. The drop in VAT revenues was compensated, however, by higher revenues from the tax on company profits (+12.5% year-on-year), higher personal income taxes (+2.3%), and higher excises (+7.7%). The social insurance contributions also increased by 6.3%. On the expenses side, Romania recorded a 10.7% increase in personnel costs, to EUR 6.18 billion. This was mainly due to the wage increases for employees in the public healthcare system, education, and other public employees, as well as by the higher minimum wage. The Government and public authorities also spent more money on goods and services (+1.5% year-on-year), interest rates (+9.5%). The capital spending related to long-term public projects went up by a third compared to the first six months of last year, to EUR 1.12 billion. Romania's general budget records deficit after four months of surplus editor@romania-insider.com