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Nov 28, 2017 11:38 EEST
November 28 (SeeNews) - Romania's consolidated budget deficit has increased to 0.79% of the projected 2017 gross domestic product (GDP) in the 10 months through October, from 0.17% in the prior-year period, the finance ministry said.
The budget gap widened to 6.6 billion lei ($1.7 billion/1.4 billion euro) in the January-October period, compared to a 1.3 billion lei shortfall in the same period last year, the ministry said in a statement late on Monday.
Consolidated budget revenue rose 10.8% on the year to 207.9 billion lei, while spending increased 13.6% to 214.5 billion lei in the first 10 months of 2017, mainly due to salary hikes in the public sector.
Tax revenue increased 9.1% on the year, social security contributions grew 16.4%, while VAT proceeds edged up 0.5% on the year in the January-October period.
Investments totalled 14.7 billion lei in the first 10 months of the year, or 1.7% of GDP, compared to 19.3 billion lei, or 3.2% of GDP, in the same period of 2016.
Romania targets a consolidated budget gap equivalent to 2.96% 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.
Moody's Investors Service said on Friday that Romania's public finances continued to deteriorate in 2017 and that the downward trend will continue in 2018. This is due to fiscal and budgetary measures adopted in 2015-16 as part of Romania's new Fiscal Code, including a further cut in VAT to 19% from 20% and legislative measures adopted by the new Social Democratic government since the start of 2017. Moody's expects the budget deficit to remain at 3% of GDP this year and exceed that level in 2018.
On Wednesday, the European Commission (EC) 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.
At the beginning of October, the International Monetary Fund (IMF) said that Romania's current account deficit is expected to decrease to 2.9% of GDP in 2018 from 3% of GDP projected for 2017.
Also in October, ratings agency Standard&Poor's said that Romania's budget and trade deficits will widen due to the consumption-focused growth.
In July, Fitch Ratings too warned on a growing budget deficit and economy overheating. "Romania is at risk of re-entering the EU Excessive Deficit Procedure this year, having only exited it in 2013," Fitch said.
(1 euro=4.6431 lei)
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