Fiscal Council head says Romania’s public deficit can drop below 5% of GDP after 2026

Romania’s general government budget deficit can drop below 6.5% of GDP next year, possibly approaching 6% of GDP, to further drop below 5% of GDP if the tax evasion and tax avoidance are addressed, the head of the Fiscal Council, Daniel Daianu, said, speaking in a conference organised by Curs de Guvernare, as reported by Ziarul Financiar.

Further control of public expenditures, with their growth below the nominal increase of GDP, would later bring the deficit closer to 4%, Daianu argued – sketching a plan for the Romanian government to take into consideration after the 2026 fiscal consolidation, driven mainly by freezing incomes (pensions, wages) and hiking taxes, which would hopefully be successfully implemented.

Romania needs to revise its 7-year Medium Term Fiscal Structural Plan (MTFSP), inked last October and approved by the European Commission in January, which became obsolete due to the 2025-2026 fiscal slippage.

The streamlining of the tax collection agency ANAF is mandatory before expecting a robust increase in collection rates, the Fiscal Council warned, stressing that ANAF is currently an institution “captured by groups of interest.”

Daianu also noted that the fiscal measures taken so far by the Romanian government are regressive, and social stability is still an unpredictable variable. The primary structural deficit should undergo an 8.15% of GDP correction over the six-year period left, Daianu pointed out, highlighting the magnitude of the correction that still has to be operated.

Given the circumstances, the fiscal impulse is negative, and no monetary stimulus is possible, but the transfers from the EU budget and some industrial policies could provide some growth impetus.

(Photo source: Inquam Photos/George Calin)