Romania’s Government published its 2019 budget planning draft on the Finance Ministry's website on January 31.

However, the Government will likely postpone adopting the budget draft for next week, due to disagreements with mayors on the budget provisions. The Parliament, which returns from the winter recess on February 4, has the final say on the budget law.

The project published by the Finance Ministry transfers to municipalities the responsibility of disbursing social benefits to categories with severe disabilities. Meanwhile, municipalities are earmarked a 60% share of the income tax collected in their jurisdictions. Mayors categorically rejected the combination of the two provisions claiming that they would lead to major losses for their local budgets, local G4media.ro reported. They want 60% of the income taxes but no additional expenses passed to them.

The budget draft for 2019 is built under the assumption that the gross domestic product (GDP) will rise by 5.5% this year. The growth is expected to be driven by higher household income, an assumption based on the tight labor market.

The budget deficit is estimated at 2.55% of GDP in 2019, while under ESA the gap would be 2.57% of GDP.

The total budget revenues are estimated at RON 341.4 billion (EUR 71.7 billion), or 33.4% of the GDP projected for this year. The largest revenues are expected from social insurance contributions (11.5% of the GDP), VAT (6.8%), excise tax (3%), and income tax (2.3%). The expenditures of the general government are estimated at RON 367.5 billion (EUR 77.2 billion), which is 35.9% of GDP.

editor@romania-insider.com

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