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Measures to combat COVID-19 crisis generate more than half of 9-month budget deficit
coronavirus covid-19

More than half of the deficit registered in the first nine months of the year, namely 37.12 billion lei (3.51% of GDP), represent the amounts left in the economic environment through fiscal facilities, investments and exceptional expenditures adopted to combat the effects of the COVID-19 epidemic, informs the Ministry of Public Finance, in the report on the execution of the general consolidated budget January to September 2020.

In the first nine months of 2020, the budget execution indicates a budget deficit of 67.27 billion lei (6.36% of GDP), almost three times higher than the deficit of 26.97 billion lei, respectively 2, 6% of GDP, recorded in the same period last year.

Given that after the first eight months of this year the budget deficit amounted to 54.77 billion lei (5.18% of GDP), only in September the negative balance rose by 12.5 billion lei, a quarter of the deficit registered throughout 2019 (48.3 billion lei).

"The increase of the budget deficit in the first nine months of this year, compared to the one registered in the same period last year, can be explained, on the revenue side, by the unfavorable evolution of budget revenues in March-September due to the crisis, as well as a result of the postponement of the fiscal obligations payment by economic agents during the crisis (16.15 billion lei), the increase by 3.22 billion lei of VAT refunds, compared to the level for the period January-September 2019, to support liquidity in the private sector, as well as the bonuses granted for the payment at due date of the corporate income tax and of the one on the income of micro-enterprises, amounting to 0.57 billion lei," the MFP report shows.

Also, on the expenditure side, compared to the budget increase by the effect of the laws, there was an increase of investment expenditures by 6.83 billion lei compared to the same period of the previous year, as well as exceptional payments generated by the COVID-19 epidemic of approximately 10.35 billion lei.

As regards the expenditures of the general consolidated budget, the Ministry of Public Finance shows that these - amounting to 294.99 billion lei - increased in nominal terms by 15.4% compared to the same period of the previous year. Expressed as a percentage of Gross Domestic Product, expenditures increased by 3.8 percentage points from 24.1% of GDP in 2019 to 27.9% of GDP in 2020.

"The increase in expenditures is also due to the measures that were considered to combat the COVID-19 epidemic, respectively to the amounts necessary for the emergency financing of the epidemiological situation management costs caused by the spread of the SARS-CoV-2 coronavirus, on the one hand, as well as the exceptional measures, in the social and economic field, aimed at diminishing the negative effects on the economy caused by the measures adopted to limit the infection among the population," the report further mentions.

According to the Ministry of Public Finance, personnel expenses amounted to 80.99 billion lei, up 6.5% compared to the same period last year. Expenditures on goods and services totaled 39.61 billion lei, up 12.7% compared to the previous year. An increase is also reflected in the budget of the Single National Health Insurance Fund of 8.1% compared to the same period of the previous year determined by higher reimbursements for the payment of medicines subject to price-volume contracts and for the settlement of outpatient medical services.

Expenditures on social assistance amounted to 104.01 billion lei, up 22.9% compared to the same period of the previous year. At the same time, starting with April, payments were made due to the measures that were taken exceptionally, in the social and economic field, to reduce the negative effects generated by the COVID-19 pandemic.

According to official estimates, the budget deficit will rise to 8.6% of GDP this year, five percentage points being directly related to the crisis period Romania is going through.


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