Romania’s government estimates its public deficit to reach 8.4% of GDP under ESA methodology this year marking a 0.9 percentage points (pp) consolidation from 9.3% of GDP in 2024, and targets stronger, 2.4pp consolidation to a 6%-of-GDP deficit in 2026 under the progress report sent to the European Commission (EC) under the Excessive Deficit Procedure (EDP) consulted by Economedia.ro.
Romania is supposed to file two such reports each year, with the second one due October 15, but it failed to submit the first report by April 15, prompting warnings from the EC in June.
The deficit of the primary budget, not including the public debt cost, will decrease slightly more consistently this year to 5.6% of GDP from 6.6% of GDP in 2024.
The 0.9%-of-GDP expected rise in the revenues-to-GDP ratio, plus the impact of freezing wages and pensions, was supposed to deliver a stronger fiscal consolidation this year – but the carry-over effect of the wage hikes operated in late 2024 and the rising cost of public debt had a negative impact, the government explained.
The government’s current revenues-to-GDP ratio has improved by 0.7pp, plus the impact provided on the expenditures side by freezing of the wages and pensions is partly offset by the higher cost of the public debt (+0.7% of GDP compared to 2024) and stronger public investments (+0.8% of GDP versus 2024), resulting in a smaller-than-planned deficit this year.
The government’s document outlines the measures implemented in January 2025, those legislated in July and implemented in August, respectively January 2026, plus the measures passed by the lawmakers in September and mostly cleared by the Constitutional Court in October.
The first budgetary measures were implemented as early as January 2025, including freezing wages and pensions, but also a higher dividend tax rate and tightening the microenterprise preferential fiscal regime. The government estimates a budgetary impact on the revenues side of 0.35% of GDP, but does not provide an estimate for the expenditures side for this initial package implemented immediately after the parliamentary elections last December.
The impact of the July package of budgetary measures (the first package of prime minister Ilie Bolojan) is estimated at 0.6% of GDP in 2025 (revenues side) and 3.45% in 2026 (roughly equally split between revenues and expenditures), while the second package legislated in September will add 0.3% of GDP impact for 2026 on the revenues side.
Romania pledges to observe the recommendations set by the EC in July 2025.
The increase in net primary expenditure (EC’s benchmark under EDP) is planned to remain within the limits set by the Council Recommendation of July 2025, namely below 2.8% in 2025 and below 2.6% in 2026, ensuring compliance with the requirements regarding the adjustment of the excessive deficit and compliance with European fiscal rules.
In 2026, fiscal consolidation is supposed to gain momentum, with the ESA budget deficit estimated to be reduced by 2.4pp compared to 2025, respectively to 6.0% of GDP. This adjustment is achievable taking into account the fiscal-budgetary measures adopted in the second half of 2025, both on the revenue side which bring an increase in current revenues of approximately 1.2 % of GDP compared to 2025, and on the expenditure side which lead to a decrease in personnel and social assistance expenses of approximately 1.7 % of GDP compared to 2025, as a result of maintaining the measure of freezing salaries in the budgetary sector and pensions.
On the other hand, interest expenses increase their share in GDP by 0.3pp, and public investments increase by 0.3pp, in the context of the acceleration of the implementation of projects financed through the PNRR, once it enters the final stage of implementation, as well as the implementation of projects financed from the 2021-2027 multiannual financial framework, and the rest of the expenses are estimated to remain at the same level as in 2025, as a share in GDP.
The fiscal adjustment will be more ample in terms of primary deficit, which is cumulatively reduced by approximately 4.3pp in the period 2025–2026, to 2.7% of GDP in 2026.
In structural terms, the deficit is corrected over the entire period by approximately 3.5pp, from a structural balance of -8.8% of GDP in 2024 to -5.3% of GDP in 2026, confirming an effective consolidation of the budgetary position, especially in 2026.
iulian@romania-insider.com
(Photo source: Ungureanu Vadim/Dreamstime.com)
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