Profit.ro<\/a>. This would put the deficit close to the 2023 level, before the major fiscal slippage in 2024, when the deficit reached 8.65% of GDP in cash terms and 9.3% in ESA terms.<\/p>\nThe more significant risk associated with a PSD-centred government, however, would materialise in 2027 if the new government pursued tax cuts.<\/p>\n
“Tax cuts, especially a VAT reduction, if adopted, would be very damaging to the 2027 budget deficit,” the JP Morgan report concluded.<\/p>\n
The bank argued that, in the absence of tax increases, reducing the deficit in 2027 would require keeping the growth of government spending below nominal GDP growth.<\/p>\n
VAT-driven consolidation is unlikely to last<\/h3>\n
“The VAT rate hike last year provided impetus to fiscal consolidation, but the momentum will not last forever,” JP Morgan warned.<\/p>\n
At the end of the first seven months of 2026, the budget deficit stood at 2.3% of GDP, broadly in line with JP Morgan’s expectations. The deficit nevertheless widened during May-July, partly because of increased spending on projects financed from European funds. The bank expects spending related to European projects to remain high in August and September as well.<\/p>\n
On the revenue side, budget revenues continued to increase in real terms in July, which Nicolaie Alexandru Chidesciuc, the author of the JP Morgan report, described as a “strong performance”, attributing it largely to the VAT rate increase implemented last year.<\/p>\n
“Basically, without last year’s VAT increase, Romania would have been in a significantly worse position in terms of revenues and budget deficit,” according to the report.<\/p>\n
Despite the stronger revenue performance, however, “the budget deficit is deepening due to increased spending”, Chidesciuc warned.<\/p>\n
Rising interest costs will add further pressure as government debt continues to accumulate.<\/p>\n
The JP Morgan assessment therefore points to a relatively manageable fiscal trajectory for 2026, but a much more significant policy challenge in 2027. The fiscal consolidation achieved so far has relied partly on the one-off boost to revenues from last year’s VAT increase, while maintaining the consolidation momentum will increasingly depend on expenditure restraint and political commitment – particularly if a PSD-centred government seeks to reverse part of the tax increases.<\/p>","protected":false},"excerpt":{"rendered":"
The European Commission and Romanian officials currently envisage a deficit of around 5.9% of GDP. JP Morgan had previously expected Romania to outperform its official deficit target this year. The current trajectory points to a budget deficit of around 5.7% of GDP in cash terms, compared with the official target of 6.2%, JP Morgan estimated, […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-11872","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/ofero.news\/index.php?rest_route=\/wp\/v2\/posts\/11872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ofero.news\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ofero.news\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/ofero.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11872"}],"version-history":[{"count":0,"href":"https:\/\/ofero.news\/index.php?rest_route=\/wp\/v2\/posts\/11872\/revisions"}],"wp:attachment":[{"href":"https:\/\/ofero.news\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ofero.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ofero.news\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}