Romania Posts Budget Deficit of 1.4% of GDP in Jan-May

Revenues to the consolidated budget in January-May amounted to RON123.8 billion, or 12% of GDP, compared with 11.7% of GDP in the same period of 2018. In nominal terms, revenues to the consolidated budget were 11.6% higher than in the same period last year.

Social security contribution collections grew 18.5% in January-May, driven by an increase in number of employees, a raise in the minimum wage and the transfer of contribution payment obligations from employers to employees.

Value-added tax collections grew 12.8% on the year, to RON24.8 billion, while excise duty collections grew 5.6%.

Property tax collections grew 7.8% on the year in January-May, while income tax revenue declined 7.9%, due to a cut in the income tax rate to 10% from 16% starting in 2018.

Budget spending in the first five months amounted to RON138.5 billion, 16.3% higher than in the same period last year, the data showed.

Staff spending grew 24.6% due to double-digit wage growth in the public sector and a raise in the minimum wage. Social welfare spending grew 15% due to growth in pensions. Goods and services spending grew 14.8% in the first five months.

Interest payments grew 13.7%, while investment spending, which includes capital expenditure and development programs financed from local and external sources, amounted to RON9.6 billion, RON2.2 billion higher than in the same period last year.

The government targets a deficit of 2.76% of GDP in 2019, just below the EU limit of 3%, and sees this year's economic growth at 5.5%, which analysts deem overly optimistic.

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