Budget deficit reaches 7.12 pct of GDP after 11 months into 2024

The budget deficit climbed to 7.12% of GDP after the first 11 months of 2024, compared to 6.19% of GDP after 10 months, or 4.58% of GDP in the same period last year, according to data released Tuesday by the Ministry of Finance."The execution of the general consolidated budget in the first eleven months of 2024 ended with a deficit of 125.72 billion RON, or 7.12% of GDP compared to the deficit of 73.55 billion RON, or 4.58% of GDP for the 11 months of 2023," states the cited source.The total revenues amounted to 523.94 billion RON in the first eleven months of 2024, registering an advance of 12.7% (y-o-y), while the expenditures of the general consolidated budget totaled 649.66 billion RON, up in nominal terms by 20.6% compared to the same period of the previous year.   The new government hikes taxes, caps public sector wages and pensions   *The prospect of presidential and parliamentary elections in Romania in November and December had triggered a spending surge that was expected to push the 2024 budget deficit to 8.6% of GDP, www.euractiv.com reads.   Romania's new coalition government approved on Monday (30 December) tax hikes and capped public sector wages and pensions from January in a series of measures that are expected to save up to 130 billion lei (EUR 26 billion), Finance Minister Barna Tanczos said.   The prospect of presidential and parliamentary elections in central Europe's second-largest economy in November and December had triggered a spending surge that was expected to push Romania's 2024 budget deficit to 8.6% of GDP.   Tanczos said on Monday preliminary data showed the deficit stood at 8.5% of economic output, adding the final figure will stay below 9%. It is the European Union’s largest deficit as a percentage of gross domestic product.   The emergency decree approved on Monday raises the tax on company dividends to 10% from 8% from January 2025. It lowers a tax threshold for the smallest companies - those with no more than three staff and revenue of less than 500,000 euros per year - in stages in 2025 and 2026.   It also eliminates tax exemptions and fiscal incentives for IT, construction, agriculture and the food industry. It also reintroduces a tax of 1.0% -less than 1.5% initially envisioned - on the value of all buildings owned by companies, from oil wells to warehouses to electricity poles.   The tax was sharply criticized by businesses, particularly by energy firms which will be worst hit. Tanczos said the enforcement norms will be drafted in the first quarter, as well as a detailed impact assessment.   The decree also caps public sector wages and pensions as well as a series of subsidies. According to a new law, pensions were supposed to be indexed as of January.   Prime Minister Marcel Ciolacu said he was confident pensions will either be indexed in the second half of 2025 or else those with small pensions will receive one-off aid when the government builds the 2025 budget plan in January.   Tanczos also said he will aim to draft the budget plan without raising value added tax or the flat tax on income if possible. Romania had submitted a deficit-cutting strategy to Brussels in late October but had not specified what tax and spending measures it planned to take.   Romania aims to lower its deficit in increments over seven years, from 7.0% in 2025 to 2.5% in 2031.