Romania’s general government budget deficit widened by 6.8% y/y to RON 15.77bn [EUR 3.57bn] in 2013 but remained roughly constant on the year when expressed as a share of GDP, equalling 2.5%, the finance ministry announced.

Notably however, the revenue-to-GDP ratio decreased by 0.9pps to only 32%. Out of this, 1.4% of GDP (constant from 2012) were transfers from the EU budget.

Revenues increased by only 3.6% to RON 200bn in 2013 as income taxes and social security contributions expanded above the average in line with the higher wages and slight recovery in employment.

The income tax collections increased by 8.5% to 11.4% of total budget revenues [vs. 10.9% in 2012]. Social security contributions increased by 5.3% to 27.2% of budget revenues, up from 26.7% in 2012.

On the opposite, profit tax collections inched up a mere 0.7% and consequently their share in total revenues contracted slightly to 5.5%. Notably, the VAT collections increased moderately by 2.6% – and even more strikingly they contracted by 1.2% y/y in Q4 alone based on our calculations.

Public spending increased slightly steeper than revenues - by 2.8% y/y to RON 215.8bn. But its share in GDP shrank to 34.5% in 2013 from 35.4% a year earlier. Higher payroll (up 13.5% to 21.5% of total expenditures) and higher goods and services purchase (up 12% to 17.9% of total expenditure) were offset by lower capital spending and only a slight increase in interest payments.