Romania’s public deficit tops 4.5% of GDP in January-August

Romania’s general government deficit reached RON 80 billion (EUR 16 bln), or 4.53% of the GDP projected for the whole year at the end of August, up from RON 71 bln (over EUR 14 bln, or 4.02% of GDP) one month earlier, according to Profit.ro quoting sources within the Finance Ministry familiar with the budget execution expected to be officially published after September 25.

In January-August 2023, the country’s public deficit was only RON 42 bln, or 2.65% of GDP – roughly half of the full-year deficit.

The government initially set a 5%-of-GDP deficit target for 2024, but now it would be happy to see the gap at 6.9%, which is in line with the latest projection of the European Commission. Amid slow economic growth and lack of predictability in the budget execution, particularly ahead of the parliamentary and general elections, the gap may exceed significantly the new (unofficial) target.

The new pension Law enforced as of September will generate supplementary expenditures worth RON 10 bln (EUR 2 bln, over 0.6% of GDP), but the government hopes to cover part of this permanent increase in public spending with the RON 9 bln one-off collected from the tax amnesty.

On the downside, the tax amnesty will generate public expenditures (tax breaks) worth RON 1.1 bln in 2025 – adding more pressure on the government to hike the taxes next year.

In early September, Romania revised the public financing plan for the year from RON 181 bln to RON 217 bln, with the supplementary financing consistent with the new (unofficial) deficit target of 6.9% of GDP.

(Photo source: Ungureanu Vadim/Dreamstime.com)