Romanian PM's advisor confirms 5%-of-GDP deficit target for 2024, no tax hike next year

Florin Spătaru, an adviser in the chancellery of Romanian prime minister Marcel Ciolacu and former minister of economy, speaking for B1 TV, rejected the European Commission's fiscal slippage concerns and assured that the public deficit would remain close to the 5%-of-GDP target this year. He also assured the government will not hike the tax rates next year to finance the pension reform.

Spătaru said the public budget posted a surplus in one of the months this year, but he hasn't mentioned which one. It could be only May since the data for the January-April period were officially released, and none of the four months ended with a surplus.

Romania's general government budget reached 3.43% in January-May, edging up against the government's expectations from 3.24% in January-April, according to preliminary (hence not official) data published by Profit.ro.

Under the Spring Forecast, the Commission said Romania's public deficit would hit 6.9% of GDP to decline to 6/6% of GDP in 2025. More recently, the Commission recommended that the European Council urge Romania to take fiscal consolidation steps as soon as this year – and not wait until 2025.

The Romanian official confidently rejected the European Commission's gloomy fiscal projection.

"The European Commission should better pay more attention to the latest statistical data published by Romania. After many years, we managed to have a budget surplus, not a deficit, in one month of 2024. So this deficit that we registered in the first part, which was caused by certain one-off payments, [...] is now decreasing since we have a surplus in one month," Florin Spătaru stated, implying that the public deficit in January-May (to be soon published officially) decreased below 3.24% of GDP.

Spătaru also argued that the new Pension Law, which envisages an average increase of pensions by 40%, was a target included in the National Resilience Facility (PNRR), therefore is quite surprising to see the Commission's experts expressing concerns about its impact.

Asked if the increase in pensions puts pressure on the budget, Spătaru denied. He said that the increased expenditures of the public pension system were envisaged when drafting the medium-term budget projection.

Spătaru also reminded that PM Marcel Ciolacu repeatedly said that there would be no tax hike "because we want to convey a message of support to the economic environment."