The Ministry of Finance Is Increasingly Pessimistic about Budget Revenues and the Economic Situation

The department said that as a result of the slower-than-expected economic recovery late last year, as well as some fiscal policy measures applied from 2023, there is a decline in tax revenue and indirect tax collections in the first half of this year. “In order to maintain the level of state budget expenditures under such conditions, as well as to cover some additional expenditures, the proposed amendment to the state budget provides for an increase in the budget deficit, as well as reallocation of part of the identified savings towards higher priority expenditures,” the Finance Ministry said. Thus, based on the proposed assessment, the volume of the state budget for 2024 will change from the initially approved volume as follows: - the state budget revenues will decrease by 801.5 million lei and will amount to 65.83 billion lei; - the state budget expenditures will increase by 386.3 million lei and will amount to 82.61 billion lei; - the budget balance (deficit) will increase by 1 billion 187.8 million lei and will amount to about 16.78 billion lei. According to the Finance Ministry, the main factors that determined the introduction of changes to the state budget for 2024 are the adjustment of budget figures to revenues, expenditures and budget balance (deficit), arising from the forecast of macroeconomic indicators for 2024, presented by the Ministry of Economic Development in March, and the outturn of the state budget for the first 5 months of this year. It should be noted that the Ministry of Economy initially estimated economic growth in 2024 at 3.5% and later revised the forecast to 2.5%. The Finance Ministry says the forecast was agreed with International Monetary Fund experts during the mission’s visit in the first quarter of this year. “However, the implementation of the forecast scenario for 2024 may turn out to be more pessimistic than expectations, characterized by an extremely high degree of uncertainty, with risks of additional shocks with economic, political, social ramifications, etc.,” the Ministry of Finance notes.