The European Commission agreed that Romania will reach a budget deficit of 8.4% of GDP this year, specifically RON 159 billion (almost EUR 32 billion), prime minister Ilie Bolojan announced at a press conference held in Bucharest on September 24, following his visit to Brussels. The expert teams from Romania’s Finance Ministry and the European Commission have carried out negotiations over the past few weeks.
The deficit is expected to drop to just over 6% of GDP next year, Bolojan announced. The net primary expenditures, the benchmark followed by the European Commission under the Excessive Deficit Procedure, would just enter the planned trajectory envisaged under the 7-year consolidation plan, he explained.
The effects of the packages of budgetary measures are expected to be approximately 0.6–0.7% of GDP this year and over 2.5% of GDP next year.
PM Bolojan said that the EC appreciated the measures taken by Romania and their importance, as well as the difficult budgetary situation.
However, he emphasized that Romania needs to confirm its commitment by adhering to budgetary discipline both this year and next, and by continuing reforms to reduce spending and make the state more efficient, as well as maintaining political stability.
Part of Romania’s deviation from the initial budget deficit target, 7.1% under the initial budget planning and 7.5% of GDP under the informal revision in July, is caused by the higher-than-planned interest paid on debt, PM Bolojan explained, with the investment cost also exceeding expectations.
The interest paid this year is estimated at RON 50 billion versus RON 40 billion initially planned. The RON 10 billion (EUR 2 billion) differential accounts for over 0.5% of GDP.
Also, the co-financing cost will be borne on this year’s and next year’s budgets. Romania still has EUR 10 billion PNRR money to spend this year and in 2026, which will occupy a large part of the budgetary space allocated to investments. This year’s budget, for instance, includes a significant share of investments, namely RON 149 billion (7.9% of GDP).
iulian@romania-insider.com
(Photo source: Cosmin Iftode/Dreamstime.com)
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