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UPDATE 1- Romania posts 10-mo budget gap of 0.17%/GDP, spending likely to rise by year-end

UPDATE 1- Romania posts 10-mo budget gap of 0.17%/GDP, spending likely to rise by year-end Romania's finance ministry. Author: Gabriel. Licence: Creative Commons, Attribution.

BUCHAREST (Romania), November 28 (SeeNews) - Romania's consolidated budget showed a ten-month deficit equivalent to 0.17% of the projected 2016 GDP, the finance ministry said on Monday.

In the like period a year earlier, Romania's consolidated budget showed a surplus of 9.04 billion lei, equivalent to 1.28% of GDP.

Romania's consolidated budget deficit totalled 1.3 billion lei ($305 million/288 million euro) in the January-October period, as revenue fell 2.1% on the year to 187.6 billion lei, while spending rose 3.4% to 188.8 billion lei, finance ministry data showed.

"A 0.2% of GDP budget deficit at the end of October confirms the likelihood of high government spending at year-end," UniCredit Bank analysts said on Monday in a weekly note.

Raiffeisen Bank analysts said in a daily market report that the decline of budget deficit to 0.2% of GDP after ten months, from 0.5% of GDP recorded after nine months "leaves even more space for public authorities to increase public spending in the upcoming period."

"Given past years’ experience, we expect the bulk of the deficit to be realized in December when a spike in public spending would occur," Raiffeisen Bank analysts added.

In the January-October period of 2016, revenues from income tax increased 11.2%, proceeds from excise duties climbed 5.6%, and social security contributions grew 7.3%.

On the other hand, VAT revenue decreased by 8.8%, reflecting a VAT cut from 24% to 20% in January 2016 and a reduction to 9% for some food items, in effect from June 2015.

Investments in the ten-month period totalled 19.3 billion lei, or 2.5% of GDP. By comparison, in the first ten months of 2015 investments amounted to 22.7 billion lei, or 3.2% of GDP.

For the January-September period, Romania's posted a budget deficit equivalent to 0.49% of GDP, finance ministry data showed.

Romania targets a consolidated budget gap equivalent to 2.95% of GDP on a cash basis in 2016, just below the 3% EU ceiling.

The country's consolidated budget for 2015 showed a deficit of 1.47% of GDP, below the 1.85% limit set in the fiscal strategy for that year.

The budget deficit decreased after the first ten months of 2016, compared to the end of September due to higher seasonal payments to the state budget, mainly the deadline on 25 October for the anticipated third quarter profit tax, while all categories of spending progressed in line with the previous months, UniCredit analysts said.

Raiffeisen Bank analysts said that the budget surplus posted in October was driven by good performance on the public revenue side coupled with tight control over some discretionary public expenses.

(1 euro=4.5147 lei)

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