Romania’s general government budget deficit reportedly rose by 22% y/y to RON 44 billion (EUR 0.9 billion), accounting for 2.3% of GDP in Q1 (2.05% in Q1 2024), according to Profit.ro quoting sources within the Finance Ministry.
The figure would mark a significant deterioration, forcing the government to announce a new fiscal corrective package, including tax hikes, in order to avoid the imminent sovereign rating downgrade announced by the major rating agencies.
Romania’s debt is rated at the lowest level in the investment-grade area with a negative outlook from the three major agencies. It remains unclear whether the rating agencies would wait until after the May presidential elections to review the country’s creditworthiness (thus giving the government more time to address what seems to be a new fiscal slippage), but this remains an option.
Separately, the European Commission will assess Romania’s fiscal conduct under the Excessive Deficit Procedure (EDP) at the beginning of June, and among the steps it could take in response to the deviation from the fiscal consolidation plans is the suspension of EU funds. Even if the amounts initially targeted were not very large, the message for the financial markets would be strong and could thus pose serious problems for the government.
Official Q1 budget execution figures are expected after April 25.
Romania’s public deficit rose 4.3% y/y to RON 30.2 billion in January-February – or 1.58% of GDP from 1.64% in the first two months of 2024.
The government seeks to bring the budget deficit down to 7.0% of GDP in 2025, from 8.65% in 2024.
The International Monetary Fund (IMF), under the revised projection for Romania, predicted a 7.8%-of-GDP deficit this year and a gap of 6.4% of GDP in 2030 – more than twice the government’s target.
iulian@romania-insider.com
(Photo source: Alexandru Marinescu/Dreamstime.com)
Leave a Reply