The first adjustment of Romania's 2014 public budget planning will be operated on July 30, unofficial sources told news agency Mediafax.
An IMF team is supposed to supervise the adjustment, the unnamed sources informed earlier in June when the IMF experts announced the postponement of the stand-by deal review until after the November presidential elections.
Romania’s budget deficit is planned to narrow moderately by 0.3% of GDP to 2.2% of GDP this year.
Despite lower than expected revenues in the first months of the year, the full-year deficit target remains achievable due to the supplementary tax on special industrial assets that generated more revenues than planned. This will also cover the loss in revenues generated by the very likely enforcement of lower social security contributions [CAS] as of October.
Romania’s general government deficit shrank 72.6% y/y to RON 651mn [EUR 146mn] in Apr-May – accounting for 0.10% of the full-year projected GDP, after a similar sharp 77.8% y/y contraction to 0.14% of GDP in Q1. Even though not fully relevant for the entire Q2, Apr-May data prepare the ground for a robust fiscal consolidation in the second quarter of the year.
The drivers of the fiscal consolidation remained however unsustainable in Apr-May. The smaller fiscal deficit was an outcome of fewer public investments pushed down by lingering infrastructure projects, and fewer co-financing of EU-funded projects that are partly at deadlock. The European funds ministry explained that many projects are blocked by contractors giving up works after their bid turned to be too low. Also, the new but already controversial tax on special industrial assets contributed to the sharp contraction of budget deficit this year.
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