January 26 (SeeNews) - Romania's consolidated budget deficit increased to 2.88% of the projected 2017 gross domestic product (GDP) last year, from 2.41% a year earlier, the finance ministry said on Friday.
The budget gap widened to 24.3 billion lei ($6.4 billion/5.2 billion euro) in 2017, compared to a 18.2 billion lei shortfall in the prior-year period, the ministry said in a statement.
Consolidated budget revenue rose 29.4% on the year to 251.8 billion lei, while spending increased 14% to 276.1 billion lei in 2017, mainly due to salary hikes in the public sector.
Tax revenue grew 8.6% on the year and social security contributions grew 17%, while VAT proceeds increased 3.6% on the year in 2017.
Investments totalled 26.7 billion lei 2017, or 3.2% of GDP, compared to 29.5 billion lei, or 3.9% of GDP, in 2016.
Romania targeted a consolidated budget gap equivalent to 2.96% of GDP on a cash basis in 2017, just below the EU's 3% ceiling. Economic growth is projected at 6.1% in the 2017 budget bill.
At the beginning of the month, Fitch Ratings affirmed Romania's long-term foreign and local currency issuer default ratings (IDR) at 'BBB-', with stable outlooks, but warned that the expansionary fiscal policy has weakened the country's public finances.
In November, Romania received three other warnings on the deterioration of its public finances.
The first one came from Moody's Investors Service, saying that although Romania made material progress in correcting macroeconomic imbalances, these improvements could be eroded in the medium-term due to a loose fiscal policy and lack of reform.
The second one came from the European Commission, which said that Romania has failed to do enough to reduce its 2017 budget deficit and that the necessary annual adjustment needs to be at least 0.8% of GDP. The Commission warned that Romania may not meet its budget deficit target and urged the government to take action to avoid the opening of an excessive deficit procedure.
The third came from the European Bank for Reconstruction and Development, which raised its forecast for Romania's economic growth to 5.3% in 2017, but warned that the government may not meet its budget deficit target.
(1 euro=4.6658 lei)