The general government budget deficit increased by 6.5% y/y to RON 102.5 billion (EUR 20.2 billion) in January-September, according to data published by the Ministry of Finance. The deficit-to-GDP ratio narrowed slightly to 5.39% in the first nine months of the year, compared to 5.47% in the same period last year.
The revenues increased disappointingly in Q3, dragged down by muted consumption and slower advance of wages, while the expenditures kept rising above expectations, pushed up by (unexpected) expenditures on goods and services and higher interest on public debt. The effects of freezing wages in the budgetary sector at the level of November 2024 showed some results for the first time in the third quarter of this year.
The revenues increased by 12.3% y/y to RON 467 billion and accounted for 24.6% of the GDP projected for the full year, compared to 23.6% in the same period of 2024. The expenditures rose by 11.2% y/y to RON 569.4 billion, to 29.9% of GDP from 29.1% of GDP last year.
Romania’s government targets a deficit of 8.4% of GDP this year, marginally below 8.65% of GDP in 2024.
In Q3 alone, the budget deficit widened by only 0.3% y/y nominally to RON 32.7 billion, or 1.72% of GDP, compared to 1.85% of GDP in the same period of 2024.
Filtering out the effects of the transfers from the EU budget (on both revenues and expenditures), the deficit contracted by 1.9% y/y to RON 28.5 billion or 1.5% of GDP compared to only 1.5% in the same period last year. It is a thin improvement achieved in the context of the first package of budgetary reforms being implemented as of August 1 – namely for only two of the quarter’s three months. Even so, the improvement can be regarded as disappointing compared to the magnitude of the measures (VAT rate hike, higher excise duties, constant wages in the budgetary sector, and constant pensions).
The budget revenues in Q3 increased by 11.4% y/y (+12.7% y/y in H1) to RON 156.4 billion, while the revenues without the transfers from the EU budget increased by only 8.4% y/y to RON 146.5 billion. The volume of transfers surged by 85% y/y to RON 9.9 billion.
The tax revenues rose by only 8.7% y/y in the third quarter (+11.9% y/y in H1) despite the net VAT collections, typically around or above a fifth of total budget revenues in Romania, improving to +14.8% y/y from +3.8% y/y in H1. But as the wages lost momentum, the revenues from income taxation also eased to (a still substantial) +16.6% y/y from +21.8% y/y in H1.
Social security contributions, typically roughly a third of the budget revenues in Romania, also lost momentum to +8.5% y/y in Q3 from +11.6% y/y in H1.
The volume of excises collected in Q3 surprisingly lost momentum compared to H1 and increased by only 11.0% y/y compared to +11.9% y/y in H1 despite the higher excise duties enforced under the budgetary measures legislated in July.
Total expenditures rose by 9.3% y/y (+12.1% y/y in H1) to RON 189.1% y/y in Q3, while the expenditures without those financed out of transfers from the EU budget increased by only 6.6% y/y (+11.3% y/y in H1) to RON 175.0 billion. The expenditures financed from the EU budget increased by 59% y/y to RON 14.1 billion in the third quarter of the year.
The current expenditures still increased at a relatively high pace compared to the quasi-austerity measures imposed by the government: +12.0% y/y in Q3 compared to +12.0% y/y in H1.
While the payroll envelope contracted nominally by 1.5% y/y in Q3 (+10.1% y/y in H1), the budget of expenditures for purchasing goods and services rose by 21.1% y/y in Q3 from a moderate +1.0% y/y in H1. Like the public payroll, the volume of social security expenditures showed positive developments, rising by only 9.6% y/y in Q3 from +15.3% y/y in H1 – but they still show unsustainable advancement.
The higher interest paid on public debt, +63.2% y/y in Q3, accelerating from +43.3% y/y in H1, made an important contribution to the overall current expenditures.
The interest payments accounted for 7.8% of total budget expenditures in Q3 (6.6% in H1), and they already reached 2.1% of the year’s expected GDP in January-September, compared to 1.5% of GDP in the same nine-month period of 2024. Similarly, the social security expenditures, typically a third of total expenditures in Romania, rose to 9.9% of GDP in January-September 2025 from 9.4% in the same period of the previous year.
iulian@romania-insider.com
(Photo source: Vlad Ispas/Dreamstime.com)
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