The budget revenues are expected to rise this year by 11%, according to the 2026 budget plan, driven by 16% stronger VAT collection, Ziarul Financiar reported, citing the draft budget plan published by the Finance Ministry. The daily questions the optimistic assumptions of the government, on the revenues side, where the revenues would reach a record level of 36% of GDP.

The 16% rise in VAT revenues is more than twice the average inflation rate in a year when the retail sales are not expected to grow. In 2025, VAT revenues grew by only 11%, in line with the inflation rate, despite the increase in the VAT rate from 19 to 21% over the summer and the positive dynamics of the retail sales.

Still, the budget plan assumes 1% GDP growth and 3.6% y/y inflation at the end of the year (6.5% y/y average inflation) – a scenario that may be unrealistic. While the higher inflation could bring the revenues in line with the plan, in nominal terms but not as a ratio to GDP, the expenditures will come under pressure compared to the government’s plan for a number of reasons, including the inflation, higher borrowing cost, and possibly currency depreciation.

Furthermore, the higher inflation will put supplementary pressure on the incomes of employees in the budgetary sector and pensioners. 

iulian@romania-insider.com

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