The general government budget deficit in Romania contracted by 2.3% y/y to RON 56.0 billion (EUR 11.1 billion, cash terms) in January-April, according to data published by the Finance Ministry.
The deficit-to-GDP figure increased to 2.95% for the first four months of the year from 3.25% in the same period of 2024 but advanced from 2.28% in the first quarter of 2025.
Romania set a 7%-of-GDP deficit target for 2025 (both cash and ESA terms) but admits that a more feasible figure would be 7.5% – which would also be seen by the rating agencies as a reasonable performance, enough to keep the country’s debt in the investment-grade region. The country’s deficit hit 8.6% of GDP in cash terms and 9.3% of GDP in ESA terms last year.
Finance minister Tanczos Barna highlighted the 16% y/y advance in revenues in April alone, driven by better VAT collection, and the 3.9% y/y decline of public expenditures with goods and services in the month.
“The budget execution in the first four months of the year shows that securing sources of income to maintain the investment pace and pay the salaries and pensions, which increased last year, is a huge challenge. Romania will be able to achieve the deficit targets assumed only through firm measures, reducing spending and creating a more flexible state,” Tánczos Barna wrote in a Facebook post.
The new government will have to take steps towards consolidating revenues and, more significantly, reduce expenditures, minister Barna said.
The budget execution annual dynamic was partly impacted by high-base effects – but it was more than that.
Profit.ro argued in mid-May, when the January-April budget execution data first surfaced, that the annual comparison is not fully relevant since the May pensions were paid in advance (in April) last year, causing high base effects. Adjusted for that anomaly, the real deficit for January-April 2024 was 2.7% of GDP, Profit.ro said – indicating a y/y advance in 2025. However, more granular data show broader improvement in the budget execution this year.
Specifically, the improvement in budget execution during April was seen in both revenues and expenditures.
The revenues increased by 9.4% y/y to RON 199.9 million in the first four months of 2025, compared to a 6.9% y/y advance in Q1, while the tax revenues increased by 12.8% y/y (+10.0% y/y in Q1). Compared to the full-year GDP (projected for 2025), the budget revenues advanced to 10.6% in January-April this year, up from 10.4% in the same period of 2024.
The increase in revenues was mainly supported by advances in revenues from salary and income tax, social security contributions, and excise duties. Income tax revenues recorded a remarkable evolution, reaching RON 19.62 billion, against the backdrop of an annual increase of 25.8% y/y. This was determined in particular by a doubling of dividend tax revenues following the distribution of profits related to 2024, still subject to an 8% tax rate (10% from 2025).
Social insurance contributions increased by 10.2%, to RON 67.69 billion, a slower pace than the dynamics of the total wage fund in the economy, given that the transfer to the second pension pillar was higher than last year. Also, net revenues from the value-added tax were RON 39.04 billion, only 1.2% above the level of the same period last year, a moderate evolution influenced by higher VAT refunds and a consistent base effect.
The budget expenditures increased by only 6.6% y/y to RON 255.9 billion in January-April, compared to a 10.1% y/y advance in Q1. The expenditures-to-GDP ratio edged down marginally to 13.5% from 13.6% in the same period of 2024.
The interest on public debt still increased by 48% y/y to RON 20.4 billion and weighted 8.0% of total expenditures, up from 5.7% in the same period last year.
Personnel expenses reached RON 56.6 billion, 12.4% up y/y, representing 3.0% of GDP (2.9% in 2024). Expenditure on goods and services remained almost constant, with an increase of only 0.8% y/y, including a 5.4% advance in the public health system (CNAS) budget, for the settlement of compensated and free medicines, as well as for the financing of national health programs.
Social assistance expenditures amounted to RON 85.6 billion, up 2.3% y/y, influenced by the recalculation of public pensions under Law 360/2023, applicable from September 1, 2024, but also by energy bill compensation schemes, which amounted to RON 1.55 billion.
Public investment, including both capital expenditures and programs financed from domestic and foreign sources, stood at RON 32.41 billion, 3.6% up y/y. However, expenditures for projects financed from non-reimbursable external funds were down by 5.7% y/y, signaling a possible delay in the absorption of available European funds.
Overall, the budget execution in the first four months of 2025 confirms a moderate fiscal consolidation achieved through increasing current revenues and prudent expenditure management, especially in the investment area. However, the pressures exerted by the increasing interest rates and the ongoing social measures continue to limit the fiscal space available in the period ahead.
iulian@romania-insider.com
(Photo source: Alexandru Marinescu/Dreamstime.com)
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