The general government budget in Romania roughly doubled y/y to RON 7.9 billion (EUR 1.6 billion) in January, according to Finance Ministry data. The public gap to GDP ratio increased to 0.45% from 0.25% in the same period of 2022.

Detailed data indicate that some public expenditures were deferred from December while the current budget deficit (filtering out the effect of the EU funds) decreased due to current revenues rising by 13.7%, faster than the 9.2% y/y advance of public expenditures – a favorable situation likely to reverse later in the year.

Total revenues increased by 19.7% y/y to RON 47.4 billion, whereas total expenditures increased by 26.7% y/y to RON 55.3 billion, resulting in a double public deficit in the first month of 2024.

The volume of capital expenditures and disbursements under various programmes of the European Union (Resilience Facility, the current and past multiannual financial frameworks) were particularly high – indicating that part of such expenditures might have been postponed from December to keep the 2023 budget deficit within the limit agreed with the European Union. Thus, the sum of capital expenditures and such disbursements was RON 10.2 billion in January, four times more compared to the same period of 2023.

At the same time, the inflows from the European Union’s schemes to the national budget increased much slower, to RON 4.2 billion from RON 1.6 billion.

Separating the effect of these operations (inflows/outflows under the EU-funded schemes), Romania’s budget deficit narrowed to RON 1.8 billion in January 2024 from RON 3.2 billion in January 2023.

Interest paid on public debt dropped by 46.5% y/y, and the social security budget increased by only 3.3% y/y. However, this was a particular situation; revenues are unlikely to keep rising at such a strong pace (+20% y/y), and wages and pensions are going to rise starting in February.

iulian@romania-insider.com

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