ECONOMY FINANCE&BANKING

MFP: Romania’s Gov’t deficit widens to 16.8 billion lei, or 1.77%pct of GDP, nine months into 2018

The implementation of Romania’s national aggregate budget in the first nine months of 2018 ended on a deficit of 16.8 billion lei, or 1.77pct of the Gross Domestic Product (GDP), up by 10 billion lei over a 6.8 billion lei (0.81pct of the GDP) deficit recorded in the same period of 2017, according to data released on Tuesday by the Ministry of Public Finance (MFP).

Eight months into 2018, the deficit in the aggregate national budget was standing at 14.6 billion lei, or 1.54pct of the GDP.

Government’s aggregate receipts of 205 billion lei, representing 21.7pct of the GDP, are 13.6pct higher in nominal terms that the receipts of one year previously.

Increases were reported over the previous year in the case of receipts from insurance contributions (+ 37.3pct) and non-tax revenues (+19.4pct). Starting in February, the receipts from social contributions were positively influenced by the new legal provisions regarding the transfer of contributions from the employer’s burden to the employee’s, regulated under Emergency Ordinance 79/2017.

There was an improvement in VAT revenue collection, which increased by 9.0pct over the same period in 2017, reaching 42.4 billion lei in the first nine months of the current year. Excise duty revenues amounted to 21.0 billion lei (2.2pct of the GDP) by 7.9pct higher than in the same period of the previous year. Revenues from property rates and taxes also increased by 4.2pct over the same period in 2017.

Wage and income tax revenues declined 25.3pct following a cut in the flat income tax from 16pct to 10pct as from January 1, 2018, which was reflected in the receipts starting with the month February 2018. There was also a decrease by 37.2pct from the same period of the previous year in the tax on the use of assets, the authorisation of the use of assets or the conduct of activities as a result of the application of Emergency Ordinance 52/2017 on the refund of special taxes on motor vehicles, the pollution tax on motor vehicles, the tax on polluting emissions from motor vehicles and the environmental stamp on motor vehicles.

Amounts from the European Union for payments totalled 9.4 billion lei, 25.0pct higher than those collected in 2017 during the same period.

Aggregate outlays amounted to 221.7 billion lei, 18.4pct higher than in the same period of the previous year. Staff expenses were 25.3pct higher than in the same period of the previous year, with the increase triggered by pay increases granted under Framework Law No.153/2017 on public pay.

Outlays for goods and services increased by 9.2pct from the same period of the previous year. Significant increases were recorded both in local budgets and in the budget of the National Health Insurance Fund and in the budgets of publicly funded bodies from own income and public subsidies.

Subsidies were higher by 6.7pct than in the same period of the previous year for the same weight in the GDP of 0.5pct. Interest rates were 21.5% higher than in the same period of the previous year, accounting for 1pct of the GDP, taking into account the aggregation of interest payment due on several benchmark government securities.

According to MFP, social security outlays increased by 12.5pct over the previous year, mainly influenced by a 9pct increase in the public pension computation point as from July 1, 2017, to 1000 lei, and by a further by 10pct increase on July 1, 2018, to 1,100 lei, by increasing the social allowance for pensioners from 520 lei to 640 lei, as well as by increasing and modifying the way of computing monthly child rearing allowances and insertion incentives.

“Investment outlays, including capital expenditures as well as those related to development programmes financed from domestic and foreign sources, amounted to 15.2 billion lei, up 25.7 pct from the same period last year,” according to MFP.

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