Romania's 10-mo budget gap widens to 7%/GDP on coronavirus spending

More than half of the deficit was due to expenditures aimed at curbing the economic impact of the coronavirus pandemic, the finance ministry said in a statement.

Another reason for the widening of the budget gap was the drop in revenue during the March-October period, as the coronavirus pandemic forced businesses to defer tax payments. At the same time, the government stepped up value-added tax refunds to inject liquidity into the private sector and offered tax discounts to companies and individuals.

The government spent approximately 11.8 billion lei on extraordinary payments related to the pandemic, the finance ministry noted.

The consolidated budget deficit totalled 74.04 billion lei ($18 billion/ 15 billion euro) at the end of October, as revenues edged up 0.9% year-on-year to 263.5 billion lei, whereas spending rose by 16.4% to 337.5 billion lei.

Total tax revenue increased by an annual 5.2% in the first ten months of 2020, whereas VAT proceeds were 11% lower.

Amounts reimbursed or granted by the EU totaled 22.5 billion lei in the first ten months of 2020, up 47.7% compared to the like period of last year.

Investments totaled 35.5 billion lei in January-October, up 32.4% year-on-year.

Earlier this month, the European Commission said that it would not take further steps within the excessive deficit procedure for Romania at the moment due to the uncertainty caused by the coronavirus pandemic but would reassess the country's fiscal situation next spring.

The finance ministry said earlier this month that the consolidated budget deficit will widen to 9.1% of GDP this year, up from 8.6% forecast previously.

CFA Romania, an association of investment professionals, said on Monday they expect 2020 the budget gap to be equivalent to 8.6% of GDP, downgrading their previous forecasts of 7.6%.

Romania closed 2019 with a consolidated budget deficit of 4.6% of GDP, above the 4.4% ceiling set by the government and the EU's 3% threshold.

(1 euro = 4.8738 lei)