2019 Budget: Romanian government promises to increase public investment by 36 pct, to EUR 10 bln. Public revenue estimated at six year high

Sorin Melenciuc 31/01/2019 | 21:45

The Romanian government promises to increase public investment by 36 percent this year compared with 2018 up to around EUR 10 billion after year of declining spending on infrastructure and other key-areas like health and education.

The budget project increases the public investment spending by 36 percent in 2019 compared with 2018, up to RON 46.8 billion (around EUR 10 billion).

This public investment represents 4.57 percent of the estimated GDP but during the last few years real public investment at the end of the year was much lower than the projected value.

The government says that public investment in 2019 will be allocated to transport infrastructure (RON 5.6 billion), local development programme (RON 2.5 billion), National Investment Company (1.1 billion) or defense companies (RON 200 million).

There is no information about most of the investment spending (more than RON 36 billion) in the budget presentation sent to media by the Finance Ministry.

Public revenue has been estimated at 33,4 percent of GDP, a six years record high. According to the state budget, total value of public revenues will reach RON 341,4 billion.

The Government has estimated that most revenues will come out of social security contributions (11.5 percent of GDP, higher by 1.4 percent of GDP compared to 2018), VAT collection (6.8 percent of GDP, same as 2018), excise (3 percent of GDP lower by 0.3 percent of GDP compared to 2018), payroll and revenue tax (2.3 percent of GDP, same as 2018). The draft doesn’t specify the source for 9.8 percent of GDP worth of revenue.

The government has imposed, starting this year, a new 2 percent turnover tax for all Telecom, Energy companies and Banks in Romania.

The government estimates that Romania’s GDP will grow by 5.5 percent in 2019 up to RON 1.022.5 billion (EUR 218.9 billion), or EUR 11,306 per inhabitant, from EUR 204.1 billion (EUR 10,476 /inhabitant) in 2018.

But many analysts expect a slowdown of economic growth rate in 2019 to maximum 3 percent following the introduction of new taxes on banks, energy and telecom firms.

According to the government, the inflation will slow down to 2.8 percent at the end of this year (2.8 percent on annual average), compared with 3.3 percent (4.6 percent annual average) in 2018.

The Romanian Ministry of Finance also estimates that interest expenses will increase by around 5 percent this year compared to 2018 up to RON 13.5 billion, despite the rapid increase in interest spending and interest rates during the last year.

Experts are particularly concerned about the rapid increase of government’s interest expenses. Official data show that interest expense rose by 27.8 percent last year, to RON 12.9 billion, from RON 10.1 billion in 2017.

Higher deficits can make it more difficult for the Romanian government to raise funds in order to finance the public debt.

Romania is already EU’s member state which pays the highest interest rates for its debt. Romania’s sovereign 10-year bonds yield, a barometer for the cost of financing in the economy, is now close to 5 percent, amid growing concerns regarding the health of public finances.

Institution 2018 Budget

RON

2019 Budget

RON

% increase 2019/2018 RON Influences

2019-2018 RON

Ministry of Education 21.011.304 30.829.261 46,7% 9.817.957
Ministry of Transport 7.526.055 11.661.614 54,9% 4.135.559
Ministry of Health 5.761.983 9.485.561 64,6% 3.723.578
Ministry of Internal Affairs 15.199.489 18.467.209 21,5% 3.267.720
Ministry of Agriculture 19.801.179 22.764.073 15,0% 2.962.894
Ministry of European Funds 802.779 2.271.885 183,0% 1.469.106
Ministry of Defence 17.007.300 18.125.001 6,6% 1.117.701
General Secretariat of the Government 1.351.903 2.227.539 64,8% 875.636
Ministry of Labour 25.065.685 25.589.966 2,1% 524.281
Ministry of Finance 4.924.596 5.429.953 10,3% 505.357
Ministry of Economy 235.972 620.356 162,9% 384.384
Ministry of Research 1.410.919 1.791.824 27,0% 380.905
Ministry of Justice 4.002.390 4.257.131 6,4% 254.741
Special Communications Service 356.517 604.149 69,5% 247.632
Ministry of Foreign Affairs 867.014 1.102.282 27,1% 235.268
Ministry of Environment 363.169 529.600 45,8% 166.431
Ministry of Regional Development 5.355.807 5.523.500 3,1% 167.693
Romanian Information Service 2.331.995 2.444.385 4,8% 112.390
Chamber of Deputies 406.643 446.000 9,7% 39.357
Foreign Information Service 285.330 309.583 8,5% 24.253
Romanian Senate 192.130 210.000 9,3% 17.870
MInistry of Tourism 36.779 48.874 32,9% 12.095
Presidency Administration 53.249 55.421 4,1% 2.172
Ministry of Energy 287.375 250.024 -13,0% -37.351
Ministry of Communications 327.497 261.472 -20,2% -66.025
Ministry of Business Environment 917.648 652.161 -28,9% -265.487

 

 

 

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