Romania's budget gap widens in Jan-May

The consolidated budget deficit totalled 60.1 billion lei ($12.928 billion/12.075 billion euro) in the five months through May, as revenues rose 14.1% year-on-year to 225.38 billion lei, whereas spending increased by an annual 21.8% to 285.48 billion lei, the finance ministry said in a statement on Wednesday.

The rise in revenues was mainly supported by current revenues, such as profit tax, insurance contributions, payroll taxes, VAT payments, and non-tax revenues. Amounts reimbursed or granted by the EU totalled 16.56 billion lei in the first five months of the year, inching down by an annual 4.2%.

Total spending was equivalent to 16.2% of GDP in the review period, up by 1.6 percentage points on an annual comparison basis. Social assistance expenditure amounted to 32.3% of total spending, while staff expenses and the costs of goods and services accounted for 22.4% and 13.3%, respectively.

Investments totalled 37.8 billion lei in the first quarter, growing 1.48 times over the same period of 2023. Non-refundable external financing represented 33.6% of total investment expenditure.

Romania’s budget plan for 2024 projects a budget deficit equivalent to 5% of GDP at the end of the year and higher revenues spurred by an expected economic growth of 3.4%.

Last week, the European Commission urged Romania to tighten its fiscal policy and limit its net expenditure growth in order to reduce the general government deficit towards the reference value of 3% of gross domestic product (GDP) established by the Stability and Growth Pact.

(1 euro=4.9771 lei)