Romania's 9-mo budget gap widens to 6.36%/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-September 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 10.35 billion lei on extraordinary payments due to the pandemic, the finance ministry noted.

The consolidated budget deficit totalled 67.27 billion lei ($13 billion/ 11 billion euro) at the end of September, as revenue edged down 0.4% year-on-year to 227.72 billion lei, whereas spending rose by 15.4% to 294.99 billion lei.

Total tax revenue increased by an annual 5.1% in the first nine months of 2020, whereas VAT proceeds were 14.3% lower.

Investments totaled 29.8 billion lei in the January-September period, up by 29% compared to the same period of 2019.

In August, the finance ministry said that the consolidated budget deficit will widen to 8.6% of GDP this year, up from the original projections for a gap of 6.7%, due to additional expenses related to the coronavirus crisis.

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

CFA Romania, an association of investment professionals, said on Monday that they expect the country's GDP to shrink by 4.5% in 2020, and the budget gap to be equivalent to 7.6% of GDP. Some 70% of analysts polled by CFA in September said that the economic impact of the coronavirus crisis will be felt until the third quarter of 2021.

(1 euro=4.8741 lei)