Romania’s Fiscal Council expressed cautious optimism that the fiscal measures adopted in the second half of 2025 could reduce the budget deficit to around 6.5% of GDP in 2026, according to its assessment of the second budget revision approved by the government. The Council stated that such an outcome would represent a significant improvement from the 2024 level and align with Romania’s medium-term budgetary and structural commitments.

The institution noted that the country’s tax revenues remain among the lowest in the European Union. In 2024, Romania collected tax revenues equal to 28.7% of GDP, compared with 35% in the Czech Republic, 35% in Hungary, 37.5% in Poland, and an EU average of 40.1%. 

The Council said that the chronic under-collection reflected long-standing neglect of the need to ensure tax revenues adequate to societal demands.

The Council also stressed that improving tax collection is “a matter of national security”, citing the pressure on the public budget and the broader international context. It reiterated that reducing the fiscal deficit cannot rely exclusively on expenditure cuts, a position it described as confirmed by the structure of measures introduced by the government in 2025.

The body rejected the view that significantly higher immediate tax collection could be achieved without adjustments to the fiscal framework. It also argued that a substantial reduction in public expenditure capable of avoiding tax changes was unrealistic given the urgency of fiscal correction.

According to the Council, the widening of the budget deficit in 2024 - recorded at 8.67% of GDP in cash terms and 9.3% under the ESA methodology - resulted mainly from increases in permanent expenditure. It noted that the composition of spending contributed to the difficulty of achieving consolidation without changes to taxation.

The Council concluded that the combination of revenue-raising measures, improved administration, and controlled expenditure growth provided a credible path toward fiscal adjustment in 2026, while warning that the targets would require sustained political commitment and administrative capacity.

iulian@romania-insider.com

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