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The majority of EU countries continue to run budget deficits, with only three countries in surplus, but levels are down on last year in all countries. Although its deficit is decreasing, Romania is at the bottom of the European countries’ ranking – with a deficit level double the European average – being surpassed only by Hungary. Government debt is also falling across the bloc, but six countries – including Romania – have seen increases this year. As for the trade deficit, the EU is still running a surplus, thanks to falling import volumes – especially power supply – and rising exports. Romania does not fare well on this score either, being among the countries with the highest current account deficit. These are the findings of official data from the European Statistical Institute (Eurostat) for the first quarter of this year, published recently.
Romania’s government deficit
The government deficit stood at 3% of GDP in the European Union in the first quarter of 2023 (and 3.2% of GDP in the euro area), Eurostat data show, cited by Agerpres. In January-March 2023, there was a decrease in deficits in the EU and the euro area compared to the fourth quarter of 2022, due to a reduction in total expenditure as well as an increase in nominal GDP. Measures taken by governments to mitigate the impact of high energy prices had a strong impact on public finances in the second half of 2022 and the first quarter of 2023, and most EU Member States continue to run government deficits. In Q1 2023, the only EU Member States with government surpluses were Ireland (3.1%), Denmark (3% of GDP) and Portugal (2.8% of GDP).
Hungary, highest government deficit in first quarter of 2023
In the EU, total government revenue stood at 45.4% of GDP in the first quarter of 2023, down from 46.2% of GDP in the previous three months, while total government expenditure stood at 48.5% of GDP, down from 50.7% of GDP in the previous quarter. Among EU Member States for which data are available, the highest government deficit in the first quarter of 2023 was recorded in Hungary (11.1% of GDP) and Romania (6% of GDP). Romania recorded a deficit of 7.5% of GDP in the fourth quarter of 2022 and a deficit of 6.6% of GDP in the first three months of 2022. Romania’s budget deficit continues to remain high despite rising government revenues. The National Tax Administration Agency announced that it collected almost RON 83.535 billion from the consolidated budget in the first three months of this year, 7% more than in the same period in 2022. However, compared to the collection schedule, 96.6% of the plan was collected in the first quarter, 2.981 billion lei less.
Greece, highest level of government debt
Government debt in the European Union fell from 83.8% of GDP to 83.7% of GDP, according to data published by Eurostat and quoted by Agerpres. Compared to the first quarter of 2022, government debt as a percentage of GDP decreased in both the euro area (from 95% to 91.2%) and the EU (from 87.4% to 83.7%). At the end of the first quarter of 2023, the highest level of government debt as a percentage of GDP among EU Member States was in Greece (168.3%), Italy (143.5%), Portugal (113.8%), Spain (112.8%), France (112.4%) and Belgium (107.4%), and the lowest in Estonia (17.2%), Bulgaria (22.5%), Luxembourg (28%) and Denmark (29.4%).
Compared to the first quarter of 2022, six Member States recorded an increase in debt as a percentage of GDP at the end of the first quarter of 2023 and 21 a decrease. Increases were in Luxembourg (5.4 pp), the Czech Republic (1.7 pp), Latvia (1.1 pp), Romania (0.7 pp), Bulgaria (0.5 pp) and Finland (0.2 pp), with the most significant decline in Greece (minus 21.2 pp), Cyprus (minus 18 pp), Portugal (minus 10.8 pp), Ireland (minus 8.9 pp), Italy (minus 7.9 pp), Croatia (minus 6.4 pp), Slovenia (minus 5.2 pp), Spain (minus 4.6 pp) and Poland (minus 3.8 pp).
From 2019 Romania has doubled its government debt
Romania recorded a debt of 49% of GDP in the first quarter of 2023, up from 47.3% of GDP in the previous three months and 48.3% in the first three months of 2022. According to data analysed in May by ZF, Romania’s public debt reached 707 billion lei, i.e. more than 50% of Romania’s GDP last year. By comparison, at the end of 2019, before the outbreak of the crisis, Romania had a public debt of 373 billion lei, which was 35% of GDP at the time. In the meantime, government debt, domestic and external, has doubled.
Romania’s financing needs are around 150 billion lei in 2023, which means the current year’s budget deficit and the refinancing of old debt, ZF analysts say. The more the debt has increased, the more Romania has spent on interest, while the cost of financing has increased anyway due to higher interest rates. Thus, from these two factors: rising interest rates and higher debt, the government’s interest spending went up by 60% in the first two months of 2023 compared to the same period last year.
Trade deficit in the euro area
The eurozone nearly eliminated its trade deficit in May as exports of chemicals and machinery rose and the value of imports of energy products, especially from Russia, fell, according to Reuters. According to non-seasonally adjusted data released by the European Statistics Office (Eurostat), the euro area recorded a trade deficit of €0.3 billion in May, compared with €30.3 billion in the same period in 2022. At the same time, the European Union recorded a trade deficit of €1.3 billion in May, compared with a deficit of €37.4 billion in the same period in 2022.
EU has seen a reduction in its energy trade deficit
In the first five months of 2023, the largest decreases were recorded in energy imports, so the EU recorded a reduction in the energy trade deficit (minus €183.6 billion in January-May 2023 compared to minus €236.7 billion in January-May 2022).
In the period January to May 2023, EU exports of goods rose to €1,058.9 billion (an increase of 4.5% compared to the same period in 2022) and imports stood at €1,087.4 billion (a decline of 7.8% compared to January to May 2022). As a result, the EU recorded a deficit of €28.5 billion after the first five months, compared to a deficit of €166.4 billion in the same period in 2022.
Between January and May 2023, euro area exports of goods rose to €1,181.9 billion (an increase of 3.7% compared to the same period in 2022) and imports fell to €1,199.5 billion (a decline of 5.1% compared to the same period in 2022). As a result, the euro area recorded a deficit in January-May 2023 of €17.6 billion, compared to a deficit of €124.7 billion in the similar period in 2022.
US and China the EU’s main trading partners
In the first five months of 2023, the US and China were the EU’s main trading partners. EU exports to the US fell by 0.2% and those to China rose by 1.2%, while EU imports from the US rose by 6.2% and EU imports from China fell by 11.2%. EU exports to Russia also fell by 30.6%, while EU imports from Russia fell by 74.8%. The European Union recorded a current account surplus of €58.3 billion (1.4% of GDP) in the first quarter of 2023, after a plus of €23.5 billion (0.6% of GDP) in the previous three months and an increase of €15.7 billion (0.4% of GDP) in January-March 2022, data published by the European Statistical Office (Eurostat) showed on Tuesday. In the first quarter of this year, 14 EU Member States recorded current account surpluses, led by Germany (€69.9 billion), the Netherlands (€25.9 billion), Ireland (€13.6 billion), Spain (€10.3 billion), Denmark (€9.2 billion), Sweden (€7.9 billion), Poland (€5.5 billion) and Austria (€4.8 billion), while 12 other Member States, including Romania, recorded current account deficits.
The EU countries with the highest current account deficit were France (minus €11.8 billion), Italy (minus €5.2 billion), Romania (minus €4 billion), Greece (minus €3.8 billion), Belgium (minus €3.3 billion) and Croatia (minus €2.6 billion). In the first three months of this year, the EU recorded current account surpluses with the UK (€51.4 billion), Switzerland (€22.6 billion), the US (€18.8 billion), Canada (€9.6 billion), Hong Kong (€7.3 billion), Brazil (€6.3 billion) and offshore financial centres (€3.5 billion). Deficits were on the relationship with China (minus €42.5 billion), India (minus €3 billion), Russia (minus €2 billion) and Japan (minus €0.6 billion).
As for Romania, Eurostat data show that between January and May, exports increased by 7%, while imports rose by 2%. Under these conditions, Romania’s trade deficit stood at €11.1 billion, compared to €12.8 billion in the same period in 2022.