Romania's 1.6%-of-GDP January-February public deficit driven by still high payroll, rising interest

The budget execution data for January-February published by the Finance Ministry reveals, besides the 1.6%-of-GDP public deficit announced in advance, three major issues: still high payroll growth rates (an effect of wage hikes during 2024, likely to diminish through 2025), rising interest paid on public debt (a problem likely to deepen with higher debt and depending on the political stability), and problematic absorption of EU funds (particularly grants).

Romania targets a 7.0%-of-GDP deficit this year, down from an 8.65%-of-GDP gap in 2024, but a 7.5%-of-GDP deficit would still prevent significant deterioration in investors' confidence.