Romania reportedly sweetens planned fiscal corrective package

The European Commission accepted a 4.9%-of-GDP public gap this year (instead of 4.4%) and will allow Romania to use funds from the Union’s budget to cover the energy subsidy scheme. Thus, the government has toned down plans for the fiscal corrective measures leaving the tougher part of it for 2024, according to Cursdeguvernare.ro quoting sources familiar with the negotiations within the ruling coalition.

This may be risky, particularly as most of the structural corrective measures are deferred for 2024 – a super-electoral year when the ruling partners are less likely to reach a compromise over sensitive issues such as taxation.

The fiscal consolidation this year, estimated at RON 30 billion (EUR 6 billion or nearly 2% of GDP), is planned to be achieved in equal shares by cutting expenses and eliminating [unspecified] preferential fiscal regime in some cases, where “the preferential tax regime reached maturity”. After that, “depending on the public expenditures, tax rates will be hiked.”

The fiscal consolidation is estimated at RON 85 billion (EUR 17 billion, over 4% of GDP) for 2024 when structural measures can no longer be avoided. According to the ruling coalition’s plans quoted by Cursdeguvernare.ro, half of it will be covered by “economic growth and inflation” and the other half by (again unspecified) tax rate hikes enforceable as of January 2024.

In principle, the tax rate hikes enforced as of January 2024 should have been already enacted, but this rule has rarely been observed.

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