Romania’s mid-year budget deficit rises to 1.94 pct of GDP on high public wages, pensions

Anca Alexe 01/08/2019 | 08:59

The budget deficit increased to RON 19.96 billion or 1.94 percent of the gross domestic product in the first six months of 2019, according to data from the Finance Ministry, which represents a 38.5 percent rise compared to the deficit of 1.4 percent of GDP recorded in the previous month.

Compared to H1 2018, when the fiscal gap totaled RON 14.97 billion, the public deficit rose by 33.4 percent.

The government estimates a deficit of RON 28.25 billion or 2.76 percent of GDP for the whole year.

Consolidated general budget revenues amounted to RON 148.6 billion (14.4 percent of GDP) compared to 14 percent of GDP in the same period of 2018. As a percentage, revenues were 12.6 percent higher in nominal terms compared to the same period of the previous year.

Revenue increases were recorded compared to the same period of the previous year in the case of non-tax revenues (+ 28.1 percent), insurance contributions (+ 17.1 percent), VAT (+12.6 percent), and excise duties (+7.5 percent).

Revenues from insurance contributions were influenced by the increase of the number of employees in the economy, the gross average wage, the minimum wage, as well as the new legislative conditions transferring social contributions from employers to employees, through OUG 79/2017.

VAT revenues increased by 12.6 percent compared to the same period of 2018, reaching a value of RON 30.14 billion. Proceeds from taxes and property taxes increased by 7.2 percent.

There were decreases in the takings from income taxes, which decreased by 5.2 percent due to the income tax cut from 16 to 10 percent, first introduced in January 2018.

The country received RON 7.6 billion from the European Union in the first six months of 2019.

Spending from the consolidated general budget amounted to RON 168.6 billion in the first half of the year – 14.7 percent higher than it was during the same period of the previous year.

Public wage spending was 23.4 percent higher than it was in the first six months of 2018, due to the recent measures which have hiked salaries in the public sector.

Spending on goods and services increased by 13.4 percent compared to the first six months of the previous year. Significant increases were seen in both the budget of the single national health insurance fund, as well as in the state budget. Interest spending also increased, by 9.7 percent.

Social assistance spending increased by 11.4 percent compared to the same period of the previous year, mainly due to the 10 percent increase of the pension point starting in July 1, 2018, going from RON 1,000 to 1,100, as well as to the increase of pensioners’ social allowance from RON 520 to RON 640.

Investments, including capital spending as well as expenses related to development programs financed from internal and external sources, amounted to RON 12.3 billion – 3.2 billion more than during the same period of the previous year.

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