Romania’s general government budget deficit, expressed in cash terms, will narrow from 8.6% of GDP in 2024 to 7.8% of GDP this year, versus a 7.0% target that remains untouchable for another two years (2026-2027), according to the updated forecast of the International Monetary Fund (IMF) published along with the latest World Economic Outlook edition released on April 23. The slower-than-planned fiscal consolidation would not trigger a sovereign rating downgrade, however, the scenario implies.<\/p>\n
At the end of the forecast period, in 2023, the Fund expects Romania’s budget deficit at 6.4% of GDP \u2013 more than twice the Romanian government’s target inked in the fiscal consolidation strategy endorsed by the European Commission under the Excessive Deficit Procedure.<\/p>\n
Romania’s gross public debt-to-GDP ratio would consequently rise by 17.5 percentage points over the coming six years to 75.7% of GDP at the end of 2030.\u00a0<\/p>\n
Notably, the Fund’s methodology for calculating the gross public debt includes several elements besides those under the European Commission’s ESA. The IMF thus estimated the debt-to-GDP ratio at the end of 2024 to be 57.2%, compared to 54.8%, according to the EU’s methodology.<\/p>\n
Despite the deviation from the fiscal consolidation plan, Romania’s interest on public debt would widen moderately from 2.0% of GDP in 2024 to 2.7% of GDP in 2030 indicating no dramatic change in investors’ sentiment consistent with the rating agencies keeping the country’s debt in the investment region.<\/p>\n
The wide budget deficits over the forecast period will keep the current account (CA) gap at high values as well, under the Fund’s projection. From 8.3% in 2024, the external gap-to-GDP ratio will narrow to 7.6% this year and will further decline gradually to 6.1% in 2030.<\/p>\n
When it comes to economic growth, the IMF has worsened its estimates regarding the Romanian economy this year, from 3.3% as forecast in October to 1.6% under the updated scenario. The growth is expected to accelerate to 2.8% in 2026 and above 3% per year in the following years up to 3.5% in 2030.<\/p>\n
The economic recovery is consistent with the return of total investments at a record level of 28.8% of GDP in 2026 and above 27% of GDP in the coming years from historically modest levels of 25.4% of GDP in 2024-2025, under the Fund’s scenario.<\/p>\n
Regarding inflation, the IMF forecasts that Romania will register an average annual price increase of 4.6% in 2025 and 3.1% in 2026, after a 5.6% increase last year. In October, the IMF estimated an inflation of 3.6% in 2025.<\/p>\n
Regarding the unemployment rate, the IMF estimates that it will remain stable at 5.4% in 2025, and will decrease slightly to 5.2% in 2026. In October, the IMF forecast an unemployment rate of 5.4% in 2025.<\/p>\n