The consolidated general budget in the first two months of 2017 concluded with a surplus of RON 397.1 million, i.e. 0.05% of GDP, against RON 788.1 million, i.e. 0.10% of GDP in the same period of 2016, according to operative data from the Ministry of Public Finance (MFP).
The revenues of the consolidated general budget were of RON 34.9 billion, representing 4.3% of GDP, by 1.4% lower in nominal terms against the same period last year.
According to a MFP press release, increases were recorded as compared to last year in the revenues from wage and income tax (+13.6%), social contributions (+11.9%), tax on foreign trade and international transactions (+18.8%) and capital revenues (+76.8%).
Revenues from other taxes on goods and services increased by 90.9% against the same period last year, MFP informs.
In terms of VAT revenues, they decreased as compared to the first two months of 2016 by 15.8%, given the decrease since January 1, 2016 of the standard VAT rate from 24% to 20% as reflected in the revenues in February 2016. In February 2017 is reflected also the effect of the standard VAT rate cut from 20% to 19%, the ministry underlines.
The revenues from excises were by 5.3% lower against the same period in 2016, being negatively influenced by the decrease in some excises for some energy products since January 1, 2017.
Regarding the expenditures of the consolidated budget, amounting to RON 34.5 billion, they fell in nominal terms by 0.3% against the same period of the previous year and also decreased by 0.3 percentage points as share in the GDP.
The staff costs increased by 13.3% against the same period in 2016, following the wage increases in the second part of 2016 (…) and of the salary increases granted in 2017, i.e. 15% increase of the wages in health and education from January 1, 2017.
The expenditures on goods and services have decreased by 5.1% against the same period last year.
The interest rates are lower by 4.1% as compared to the same period the previous year, while maintaining the same level as percentage of GDP, i.e. 0.2% respectively.
Social assistance expenditures increased by 9.4% yoy.
“The expenditures for investment, including capital expenditures and the related development programmes financed from internal and external sources, were of RON 870.1 million, or 0.11% of GDP,” the MFP informs.
Ionut Dumitru: Higher risk of recession
The Chairman of the Fiscal Council, Ionut Dumitru, said Romania is getting closer to the threshold after which the increase of public debt increases the risk of recession.
“Although in February things were better, I’d say that the first two months show a development with revenues much below the budget projection. There’s a 14% increase in revenues, very disappointing, whereas the VAT and excises collection is below expectations,” Dumitru said.
“There’s a fast increase in budget expenditures for wages and pensions. On the other hand the expenditures for investments are falling, including with European funds,” the head of the Fiscal Council said.
Ionut Dumitru added there’s the risk to exceed the 3% of GDP budget deficit, as the IMF and the European Commission have warned. “If the necessary corrections are not carried out, we might exceed the 3.6% of GDP deficit as well. The pressure on expenditures is very high. It’s counterproductive that government officials speak about wage increases, given that in the past years we have already had increases in the budget system. We’re caught in a trap and I don’t know how we are going to get out of it, whereas the costs in the coming years will be very high,” Dumitru said.
He added that a 3% of GDP deficit would be very high as we are going through an economic boom and high deficits during such periods are contraindicated. “You become vulnerable during the next less favourable period and we already have this experience during the crisis, when the public debt tripled. This will happen again if we don’t control the deficit during economic boom.”
Finally, Ionut Dumitru considers the public debt is too high for our development level. “It is 40%, according to BNR, during recession it could increase to 50%. We are approaching the level when the public debt increase makes us very vulnerable and massively stimulates the risk of recession. It is good, during the economic boom, to keep the public debt under control. However, in government projections, very optimistic ones, the public debt continues to grow even during economic boom,” the Fiscal Council chairman said.