July 26 (SeeNews) - Romania's consolidated budget deficit increased to 0.77% of the projected 2017 gross domestic product (GDP) in the first half of 2017, up from 0.50% a year earlier, the finance ministry said on Tuesday.
The budget gap widened to 6.3 billion lei ($1.6 billion/1.4 billion euro) in the January-June period, compared to a 3.9 billion lei shortfall in the same period last year, the ministry said in a statement.
Consolidated budget revenue rose 8.2% on the year to 117.2 billion lei, while spending increased 10% to 123.5 billion lei during the six months through June 2017, mainly due to salary hikes in the public administration and healthcare sector.
Tax revenue increased 11.5% on the year and social security contributions grew 16.1%, while VAT proceeds fell 4.3% on the year in January-June. The drop reflected a VAT cut from 20% to 19%, in effect from January.
Investments totalled 6 billion lei in the first half of the year, or 0.7% of GDP, compared to 11 billion lei, or 1.5% of GDP, in the same period of 2016.
Romania targets a consolidated budget deficit equivalent to 2.99% of GDP on a cash basis in 2017, just below the EU's 3% ceiling. According to the EU's Maastricht treaty signed in 1992, the ratio of the annual general government deficit relative to GDP at market prices must not exceed 3% at the end of the preceding fiscal year.
Romania's consolidated budget showed a deficit equivalent to 2.41% of GDP last year, compared to a shortfall of 10.3 billion lei, or 1.47% of GDP in 2015.
The finance ministry said earlier this month that Romania will meet the 3% deficit target in 2017, after Eurostat published statistical data showing the country had a budget gap of 3.2% in the first quarter.
Eurostat said that Romania posted the highest rate of quarterly growth of government deficit in the first quarter of the year among EU member states, of 1.4 percentage points.
In May, the International Monetary Fund (IMF) warned that Romania's budget deficit is expected to widen to 3.7% of GDP this year and to 3.9% of GDP in 2018 in the absence of additional fiscal measures. The IMF advised Romania to take near-term measures to reduce the deficit, focusing on expenditure re-prioritisation and the postponement of a planned pension increase, while safeguarding social spending.
Also in May, the European Commission said Romania might not meet its budget deficit target in 2017 and urged the government to take action to avoid the opening of an excessive deficit procedure.
(1 euro=4.5733 lei)