Romania’s general government deficit has shrunk 25% from January to June this year to Ron 33.8 billion (€ 6.86 billion), compared to Ron 45.2 billion in the same period last year, the Treasury said. did. Therefore, the budget deficit approached 3.0% of this year’s projected GDP, well below 4.3% from January to June last year.

Of the total budget deficit in the first half, 13.3 billion ron (1.17% of GDP) was generated by Covid-related spending and supplementary public investment (also aimed at mitigating the effects of the crisis), the government explained. .. Around the same time last year, the government reported Covid-related spending of Ron 23 billion (2.13% of GDP).

Correcting these impacts, the budget has barely dropped to just under 2% of GDP year-over-year, but such an estimate is too simple as it cannot cope with many other impacts of the crisis.

The government initially set a deficit target of 7.16% of GDP for the whole year, but as the economy recovers faster than expected, this target will be revised downwards to narrow the gap.

By 2024, Romania needs to have a public deficit of less than 3% of GDP. The European Commission expects this plan to be earlier than October 15.

Budget revenues from January to June reached 176.4 billion rons, up 20.6% year-on-year due to increased VAT and excise tax collection. This is equivalent to 15.4% of the annual projected GDP from 13.9% last year. Most revenue categories boasted strong annual growth.

Budget spending increased visibly slowly, rising 9.8% year-on-year to 210.2 million rons, accounting for 18.4% of annual GDP compared to 18.1% last year. Public salaries, a quarter of the total budget, were only 4.5% below the average, and social security spending (one-third of the budget) rose about as fast as the average (up 8.7% year-on-year). ..

Budget execution in the first half shows some improvement from the first quarter (first quarter) to the second quarter, and from last year to this year, but the big picture is that there are other basic one-off effects. It needs to be adjusted significantly.

In terms of deficits alone, the first quarter was down 19% year-on-year and the second quarter was down 29% year-on-year. In particular, the government has allowed companies in the Covid crisis to defer membership fees to their budgets (profit tax, VAT, social security contributions) from the end of March 2020.

Therefore, cash income fell below accrual accounting last year (estimated at 1% of GDP) and exceeded “normal” accrual accounting in 2021 when the facility expired, with companies gradually paying dues. started.

Budget revenues increased 22.4% year-on-year in the second quarter, up from 18.8% in the first quarter. In contrast, spending slowed / eased from 11.2% year-on-year in the first quarter to + 8.5% year-on-year in the second quarter.

iulian@romania-insider.com

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