Romania’s government announced that the public deficit increased by 58% y/y to RON 35.9 billion (EUR 7.2 billion/USD 7.7 billion) in Q1, the equivalent of 2.06% of the GDP projected for the whole year. The gap was only 1.42% of GDP in the same period last year. 

The government seeks to bring the public deficit down to 5.0% of GDP deficit this year from 5.7% of GDP in 2023.

Both the revenues and expenditures fell short of the plan (93.5% and 92%, respectively), and the deficit was smaller than the 2.4%-of-GDP gap expected for the first quarter of the year.

The executive explained that the expenditures are higher this year because of one-off defense contracts, but the practice of deferring public spending to improve the full-year figure has been common practice and most likely applies to the end of 2023 as well.

The budget revenues increased by 15.8% y/y to RON 132.16 billion, but the tax revenues advanced by only 9.9% y/y (to RON 63.33 billion). The non-tax revenues, mainly transfers from the EU budget under the Resilience Facility and Multiannual Financial Framework, increased by 22% y/y to 52.1% of total revenues (49.5% in Q1, 2023).

Expressed as a ratio to full-year GDP, the tax revenues remained constant at 3.6% in Q1, while the non-tax revenues increased from 3.5% to 4.0%.

The budget expenditures increased by 22.7% y/y to RON 168.04 billion, but the payroll increased by 20% y/y, and the pubic spending with goods and services by 24% y/y. The interest on public debt decreased by 16% y/y.

Capital expenditures surged by 224% y/y, and the ratio of capital increase to GDP advanced from 0.3% in Q1 2023 to 0.8% in the first quarter of this year. Part of the increase was caused by defense spending, which the government announced in advance without providing quantitative details.

iulian@romania-insider.com

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