September 29 (SeeNews) - Romania's consolidated budget was in deficit equivalent to 5.18% of the projected 2020 gross domestic product (GDP) in the first eight months of the year, compared to a gap of 2.1% of GDP in the like period of 2019, the finance ministry said.
More than half of the deficit was generated by spending aimed at curbing the economic impact of the coronavirus pandemic, the finance ministry said in a statement on Monday.
Another reason for the widening of the budget gap was the drop in revenue during the March-August period, as the coronavirus pandemic prompted 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 8.62 billion lei on exceptional payments due to the pandemic, the ministry noted.
The consolidated budget deficit totalled 54.7 billion lei ($13 billion/ 11 billion euro) as at the end of August, as revenue fell 1.4% year-on-year to 201 billion lei, whereas spending rose by 13.3% to 256 billion lei.
Tax revenue increased by an annual 5.3% in the first eight months of 2020, social security contributions edged down 0.3% on the year and VAT proceeds were 14.9% lower.
Investments totaled 24.1 billion lei in the January-August period, up by 26.9% 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 Friday that they expect the country's GDP to shrink by 4.7% in 2020, and the budget gap to be equivalent to 8.3% of GDP.
Some 70% of analysts polled by CFA in August said that the economic impact of the coronavirus crisis will be felt until the second quarter of 2021, CFA said.
(1 euro=4.8705 lei)