The Ministry of Finance has published the budget execution after the first ten months of the year. According to the data, total revenues amounted to 473.5 billion lei, up 13% compared to the same period last year. Total expenditures were 583 billion lei, +21% higher than last year, so the budget deficit rose to 109.5 billion lei.
For comparison, at the end of October 2023, the budget deficit was 62.8 billion lei, representing 3.91% of GDP. At the end of September 2024, the indicator was 92.3 billion lei, which means that in October alone it increased by over 17 billion lei.
Two weeks ago, the European Commission estimated that Romania would end the year with a budget deficit of 8% of GDP, above the previously forecast level. The government estimates a budget deficit of 7.9% for this year.
Romania sent the European Commission, at the end of October, a plan to reduce the deficit over the next seven years. In it, the government commits to re-establishing the tax on profit, income and wages, value added tax and excise duties. The fiscal plan has been approved by the European Commission and the next step is for the Commission’s assessment to pass through EcoFin (a meeting of finance ministers), after which it will be approved by the European Council.
The state has also assumed major investment expenses this year, but also in the following years, in the context of having to implement projects with European funds from the EU multiannual budget, as well as projects with European funds financed under the PNRR.
Total revenues amounted to 473.53 billion lei in the first ten months of 2024, registering an advance of 13.1% (year/year), supported by receipts from current revenues: insurance contributions, VAT, wage and income tax, profit tax, excise duties and non-tax revenues.
In the receipts from income tax and wages, the increase by 22.2% (to 40.68%) is due to the increase in the minimum wage and pensions (because the pension point also increased and many exceeded the non-taxable ceiling), according to the note accompanying the budget execution.
“Profit tax revenues amounted to 32.92 billion lei, recording an increase of 19.8% (year-on-year), supported by the advance of revenue from profit tax, including the minimum turnover tax from economic agents and profit tax from commercial banks,” the document states.
Net VAT revenues recorded 99.22 billion lei, up 17.0% (year-on-year). The reasons mentioned are related to the increase in reduced VAT rates (food with added sugar, the right to use sports facilities, passenger transport for tourist purposes, for the delivery of housing as part of social policy, the delivery and installation of photovoltaic panels, solar thermal panels, heat pumps and other high-efficiency heating systems).
Excise tax revenues amounted to 36 billion lei, recording an increase of 18.2%, supported by the increase in excise tax revenues for energy products (+25.2%). This includes the increase in excise duty on fuels.
The consolidated general budget expenditures of 582.94 billion lei increased in nominal terms by 21% compared to the same period of the previous year.
Those public sector salaries expenditures amounted to 133.72 billion lei, up by 23.8%, those with goods and services by 20.9%, to 75.5 billion lei, and with interest they rose by 16.8%.
A large expense is observed with those with social assistance: 186.5 billion lei (+14.9%). The reason cited by the Ministry of Finance: “the evolution of social assistance expenses was influenced, mainly, by the increase from January 1, 2024, by 13.8% of the pension point, respectively from 1,785 lei to 2,032 lei, of the social allowance for pensioners (minimum pension) from 1,125 lei to 1,281 lei, respectively by the implementation of measures to recalculate pensions in the public system starting from September 1 this year, in accordance with the provisions of Law no. 360/2023 of November 29, 2023 regarding the public pension system”.