Romania’s government will loosen this year’s budget deficit target from 2.1% of GDP to 2.3% of GDP*, budget minister Liviu Voinea told a press conference.

The ESA budget balance will, however, not be altered** from the 2.4% of GDP target since non-cash expenditures [engagements for future payments] under the national investment programme PNDI  have been cut after the government decided to abandon PNDI, Voinea explained.

The budget plan for 2013, issued in January, was already a loosened version of the initial draft that included a 1.9%-of-GDP cash deficit target and a 2.2%-of-GDP ESA target.

The government will also adjust the projection for this year’s GDP to RON 626.2bn [0.4% up from 623.6bn previously], seeing now the real rate of the annual growth at 1.9%, up from 1.6% previously.

The cap for state guarantees will also be increased by RON 2bn [0.32% of GDP].

The budget adjustment has not been yet endorsed. But the government says that the IMF and EU have agreed with the amendments.

The budget revenues target was adjusted downward by RON 1.9bn [0.3% of GDP] to RON 209.4bn [33.4% of GDP] as a result of the below-target performance of tax collection in Q1, minister Voinea said. Expenditures will be reduced at a slower rate, by RON 0.7bn [0.1% of GDP] to RON 224.1bn. [35.8% of GDP]. The deficit will widen slightly by 0.2% of GDP to 2.3% of GDP.

Despite the lower overall expenditures, some ministries are earmarked more funds. Mainly, the health ministry will receive RON 1bn in supplementary funds to finance maternity hospitals and to cover the lower than expected claw-back tax collections. On the downside, the budget of the transport ministry will be reduced by RON 0.9bn, while the allocations for the government’s general secretariat will drop by RON 0.5bn.

* cash definition of budget

** Romania's ESA budget deficit target has been loosened by 0.2pps to 2.4% of GDP for this year under the revised 2013-2015 fiscal strategy announced by the government earlier in January. The gap still narrows significantly from 2.9% of GDP in 2012 and is expected to further shrink to 2% of GDP in 2015. The 2015 target, however, was an ambitious 0.9% of GDP under the past fiscal strategy drafted a year ago.