How Romania is seen from an EU economic indicators perspective

Eurostatistics is a synthesis based on a set of standardized and harmonized benchmarks for the comparability between countries at the European level (Principal European Economic… Mai mult

Quality of economic growth? Let’s look at resource productivity

Romania climbed last year on the penultimate position among the EU member states in terms of the productivity of resources in the economy, after Bulgaria,… Mai mult

Study: Consumption ghosts – Two-thirds of undercapitalised companies have no revenue

Romania’s economy is becoming more and more vulnerable due to the increasing number of businesses that state no revenues, register losses and debts exceeding their… Mai mult

Labour cost, more than 15% higher than last year

Hourly labour cost increased by 15.6% in the second quarter of 2018 compared to the same period of 2017 (+ 9.36%, compared to Q1 2018),… Mai mult

Fiscal Council, about budget amendment: Increase in revenues from VAT and excise duties has no basis

The Fiscal Council announced on Wednesday, the day when the Government adopted the draft budget amendment without the opinion from CSAT, that it considers the… Mai mult

5-month deficit – three times higher than last year: How, how much, why?

de Marin Pana , 2.7.2018

The general consolidated budget ended the first five months of 2018 with a deficit of -0.88% of GDP estimated for the current year, more than three times higher compared to the same period of the previous year (-0.27% of GDP at end of May 2017).

In nominal terms, it is about slightly more than eight billion lei at a GDP of about RON 930 billion.


  • Comparative deficit evolution in the first five months of 2017 and 2018
  • Month
  • 2017 budget balance (% of GDP)
  • 2018 budget balance (% of GDP)
  • 2017 balance change (% of GDP)
  • 2018 balance change (% of GDP)


In fact, if we look at the comparative evolution of the deficit in the first five months of 2017 and 2018, one single major syncope may be noticed in February 2018. Otherwise, there are no significant differences in the budget implementation and even the month of May 2018 showed better than May 2017 (-0.27% of GDP versus -0.44% of GDP).

The problem is that the gap, which was clearly placed in the second month of the year, has not been recovered, and chances are worryingly decreasing, especially that as of July 1 we shall move to a 10% increase in the pension point. Why should not we have a gap? Well, to fall within the threshold of 3% of GDP, even near to the cut-off line, and not go through the excessive budget deficit procedure, about which the EU has warned us.

Compared to the first five months of last year, both public revenues (+ 7.4% in real terms, adjusted with average inflation of 4.92%) and public expenditures (+ 12.8% in real terms) significantly increased, above the GDP growth.

Therefore, the weaker result is not the consequence of a weaker revenue collection but of an exaggerated level of expenditure, even in relation to the robust economic performance.


  • Evolution of revenues and expenditures in the first five months of 2017 and 2018
  • five months of 2017 (mln lei)  five months of 2018 (mln lei)  Difference (mln lei)     Evolution – Nominal            Real
  • Total revenues (mln lei)
  • Total expenditures (mln lei)


If the most important components of budget revenues are selected, we can see a decrease in the consumption tax and/or the ability to charge it (VAT collected had a totally slight increase of only 0.4%, well below the increase in the commodity and services delivered on the domestic market) and an impressive increase in labour taxes (+ 35.5%, after moving contributions to the employee).


  • Relative evolution of VAT and CAS in the first five months of 2017 and 2018
  • Period
  • VAT
  • CAS
  • VAT/contributions


Basically, the insurance contributions took the lion’s share from the indirect tax revenue collection (VAT plus excises, the latter with a nominal increase of 13.7%). The report has changed from 34.4% share of taxes on goods and services in total revenues in the first 5 months of 2017 and a share of 28.9% for contributions, to 34.7% in total contributions and only 32.3% in indirect taxes.

Normally, increased domestic consumption, which has been the major engine of economic growth, would have had to bring significantly more money to the budget, and only then, after this probable evolution would have been identified at the fiscal level, but which has not happened as expected, the distribution of social benefits should have been made.

Local budgets revenues have fallen by three percentage points

In order to identify the allocation of surpluses and deficits in the general consolidated budget, we made a selection of its main components. Traditionally, surpluses of local budgets and budgets of public institutions financed entirely or partly from public revenues covered most of the budget deficit.

But that has not happened anymore in the first five months of this year. The explanation is that tax collection to local budgets has been lower by about three percentage points in nominal terms (and eight percentage points in real terms), while expenditures have been maintained quasi-constant (+ 0.3%, of course, in nominal terms too, as they actually bought fewer products and services, in real terms, so they could not be reduced).

  • *
  • Budget results in first five months of 2017 and 2018 (million lei)
  • Budget             Revenues (mln lei)      Expenditures (mln lei)             Surplus/Deficit (mln lei) (%of GDP)
  • General consolidated budget
  • Of which:
  • – state budget
  • – local budgets
  • – budgets of public institutions entirely or partially self- financed


From a surplus of almost one and a half billion lei recorded in the same period of last year, self-financing public institutions also posted only a marginal margin, slightly higher than RON 0.6 billion, after a 23% increase in expenditures, most likely generated by the salary increases in the respective administration.

Salaries and social protection, granted beyond the possibilities

A selection of expenditures in the first five months of the year shows an excessive increase in the wage bill, more than five times higher than the GDP growth in the first quarter of this year. And double the increase in the amounts allocated for social assistance (anyway, of two digits and over the possibilities generated by the economy).


  • Evolution of budget expenditure in first five months of 2017
  • Period              Five months of 2017 (billion lei)          Five months of 2018 (billion lei)          Change (billion lei)            Percentage points
  • Total expenditures
  • Of which
  • – personnel costs
  • – social assistance
  • – goods and services
  • – capital expenditure
  • – projects financed with non-reimbursable funds (total 2007-2103 and 2014-2020)


However, we welcome the increases in the sections of goods and services expenditures, as well as the capital expenditures, which doubled compared to the same period of the previous year.

Also, the 22% increase in the amounts taken mostly from the EU for projects with non-reimbursable external financing.

Mergeți în homepage ›

Publicat la data de 2.7.2018

Lăsați un comentariu


Finance Ministry wants to change rules for insolvency: state could also register claims after procedure is launched

Companies’ possibility to avoid paying creditors (and in particular the payment of tax receivables) simply by declaring their insolvency would be drastically limited, according to… Mai mult

Phil Hogan: Swine fever in Romania has an impact on neighbouring countries and EU trade in pigs

Prime Minister Viorica Dancila, European Commissioner Phil Hogan and Agriculture Minister Petre Daea The swine fever epidemics in Romania has an impact on neighbouring countries,… Mai mult

Infrastructure projects lost EUR 41.5 million following budget amendment. In what projects cuts have been made

Despite the assurances that Dancila government is concerned and intensely working on the road infrastructure projects, at the budget amendment the Transport Ministry has cut… Mai mult

European Parliament have decided to adopt in October a resolution on the rule of law in Romania

Leaders of the political groups in the European Parliament have decided to adopt in October a resolution on the rule of law in Romania. The… Mai mult

"Romania's buffers have deteriorated, the country is less prepared for a negative shock" - IMF will reduce economic growth estimate

Romania will be less prepared if the economy is hit by a negative shock, as the structural deficit has been deteriorated - IMF representative for… Mai mult

Premiere: CSAT asks Finance Ministry to amend amendment - session suspended until Government comes with a draft that does not affect budgets of secret services

President Klaus Iohannis suspended on Tuesday the CSAT meeting for discussing the budget amendment, as there was no consensus on the budgets of institutions from… Mai mult

S&P maintains Romania's rating at "BBB-A-3", with a stable outlook: arguments

Rating agency Standard & Poor's confirmed on Friday ratings for long- and short-term debt in foreign and local currency to "BBB-/A-3" with a stable outlook,… Mai mult

"Romania’s presidency seems to fail before it starts": Gunther Krichbaum - reaction to anti-German violent statements made by government officials

Romania's presidency of the Council of the European Union seems to fail even before it starts, warns Chairman of the Bundestag European Affairs Committee Gunther… Mai mult

OMV Petrom sells a quarter of its deposit perimeters to finance potential gas extraction from Black Sea

OMV Petrom (SNP) will sell another 50-60 perimeters from its portfolio of about 200, as most of the company's investments focus on operating the Black… Mai mult

Emigration continues: 220,000 Romanians left the country in 2017

The number of people who left the country for more than 12 months continued to grow last year, reaching almost 220,000 people (which exceeds the… Mai mult

181 magistrates sign a criticizing letter addressed to Minister of Justice

The Minister of Justice stirred up the fury of magistrates. 181 prosecutors and judges sent him a letter criticizing Tudorel Toader for his statements about… Mai mult

Canada takes over air-policing missions operated from Mihail Kogalniceanu base

MApN announced on Wednesday that Mihail Kogalniceanu Air Base 57 had a ceremony occasioned by the handing over of the Enhanced Air Policing between the… Mai mult

Ministry of Finance is drafting a new fiscal framework valid as of January 1, 2019

The Ministry of Public Finance makes a "comparative analysis" of the Tax Code and the Tax Procedure Code with a view to applying a new… Mai mult

Eurostat: Romania and evolution of employee number in public sector in an European context

Romania, Hungary and Slovenia are the member states that recorded the largest increase in the share of public sector employees in the total number of… Mai mult