ECONOMY FINANCE&BANKING

Seven-month budget deficit at 5.1 bln lei, 0.63 pct of GDP

The execution of the general consolidated budget over the first seven months of 2017 ended with a deficit of 5.1 billion lei, or 0.63 pct of GDP, compared to a deficit of 1.74 billion lei or 0.23 percent of GDP in the same period of 2016, the Ministry of Public Finance informs.

Revenues to the general government budget in the respective period amount to 141.2 billion lei – or 17.3 percent of GDP – by 9 percent higher in nominal terms from the same period of the previous year.

According to the Finance Ministry, growth was registered against the same period of 2016 in collections from social security contributions (+16.4 percent), wage and income tax (10.8 percent) and capital revenues (+15.2 percent).

Conversely, collections from property tax dropped 6.5 percent from the similar period of 2016, mainly as an effect of the scrapping of the tax on special constructions as of January 1, 2017.

Collections from other taxes and taxes on goods and services are 62 percent higher YoY, mainly as a result of the upward trend of collections from the contribution for medicines and for the cost & volume / outcome-based cost & volume contracts financed from the budget of the Single National Health Insurance Fund.

VAT revenues were 4.6 percent down from the first seven months of 2016 against the backdrop of the reduction of the standard VAT rate from 24 to 20 percent beginning January 1, 2016, a measure that reflected in collections beginning February 2016. The effects of the lowering of the standard VAT rate from 20 pct to 19 pct are also visible in collection figures as of February 2017.

The excise tax collections were by 5.8 percent lower compared to the same period of the previous year, as they were impacted by excise cuts for certain energy products effective as of January 1, 2017.

Compensations from the European Union on account of the payments made amounted to 6.5 billion lei.

Spending with the general consolidated budget worth 146.4 billion lei was up 11.4 percent in nominal terms from the same period of the previous year.

Staff expenses increased by 20.3 percent, driven by wage increases operated in the second half of 2016 and the enforcement of OUG No. 20/2016 amending and complementing the Government’s Emergency Ordinance No. 57/2015 on the remuneration of the staff paid from public funds in 2016; the extension of certain deadlines, as well as some fiscal-budgetary measures and the amendment and completion of certain regulatory acts, as well as wage increases granted in 2017 (the 15 percent wage rise in healthcare and education as of January 1, 2017, of the 20 percent increase – beginning February 1, 2017 – of the wages of the personnel paid from public funds working in local public administration institutions and authorities, the increase of the gross minimum guaranteed basic salary from 1.250 lei to 1.450 lei as of February 1, 2017, and the 50 percent increase of the gross salary and bonuses for the personnel of public show and performance institutions as of February 1, 2017.

Expenses with goods and services increased 3.5 percent compared to the same period of the previous year, with the Single National Health Insurance Fund posting the most substantial rise of 6.6 percent.

Interest rates were by 4.1 percent lower compared to the same period of the previous year, the Finance Ministry said.

In the first seven months of the year, subsidies were by 22.3 percent higher from the same period of 2016, with farming subsidies marking the top increase.

Social assistance expenditures were 10.7 percent up YoY mainly as an effect of the successive increase of the pension point by 5.25 percent as of January 1, 2017 and by 9 percent as of July 1, 2017 to 1,000 lei, as well as of other relevant measures approved in 2016.

Investment expenditures, including capital expenditures and those related to development programs financed from internal and external sources stood at 8.4 billion lei, or 1 percent of GDP.

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