Romania’s budget deficit improves marginally to 5.68% of GDP in 2023

The general government budget in Romania reached RON 89.94 billion (EUR 18.1 billion, cash terms), or 5.68% of GDP, according to preliminary estimates from the Finance Ministry quoted by Profit.ro ahead of the January 29 official release.

The figures confirm the deficit compression achieved in November, particularly December, through the so-called “fiscal package.” After the country posted wider deficit ratios compared to 2022 throughout the year 2023, the full-year figure fell marginally under that in 2022.

The country’s public deficit increased by 11% y/y in nominal terms in 2023. Still, the slightly faster advance of nominal GDP resulted in a marginal improvement in the deficit-to-GDP ratio from 5.75% in 2022. Fiscal consolidation thus took a break after the deficit-to-GDP ratio contracted by 1 percentage point (pp) in 2022 and by 2.3pp in 2021.

The slippage was significant compared to the 4.4%-of-GDP target (cash terms) set by the government under the 2023 budget planning.

The target set for 2024 is visibly more realistic (4.9% of GDP). But the wage hikes promised in the public sector, the pension hike promised for September, and other public expenditures expected in the electoral context make the target equally challenging.

Under the ESA methodology, the deficit gap reportedly reached 5.9% of GDP, from 6.3% in 2022.

(Photo source: Alexandru Marinescu/Dreamstime.com)