Romania managed to halve its budget deficit to RON 48.08 billion in 2026, from RON 76.44 billion in the same period of 2025, according to a government press release published on Monday, August 31. As a share of GDP, the deficit fell from 3.99% to 2.34%.

Revenues increased by 11.2%, to RON 412.31 billion, while expenditures advanced by only 2.9%, to RON 460.39 billion. Significantly, VAT collections increased by more than 25% in the first 7 months of 2026 compared with 2025, and investments increased by nearly 24% to RON 76.51 billion.

“The 1.65% reduction in the deficit is proof of balanced management, in which fiscal responsibility is combined with direct support for the economy,” Romanian finance minister Alexandru Nazare said, also mentioning VAT refunds to companies of more than RON 20.4 billion, and the more than 60% increase in payments from European funds and the PNRR.

State revenues up 

During the first 7 months of 2026, tax revenues increased by 15.4%, to RON 214.32 billion, with their share of GDP rising from 9.69% to 10.42%.

The largest contribution came from VAT: net collections reached RON 88.55 billion, up 26.5%, amid the new rates in late 2025 and the 21.7% increase in gross collection, even as refunds to the private sector continued to rise, reaching RON 20.48 billion.

Social security contributions brought in RON 129.14 billion (+6.7%), the largest revenue line in the execution, supported by the expansion of the tax base. Wage and income tax increased by 8.6%, to RON 38.34 billion, partly due to dividends distributed heavily in December 2025 before the tax changes, while corporate income tax increased by 8.3%, to RON 28.35 billion. These were joined by reimbursed European funds of RON 37.28 billion, up 30.3%.

Lower personnel expenses 

While the state’s revenues increased, some expenditures decreased. The most significant decrease was in personnel, which totaled RON 95.67 billion, 4.1% lower than the previous year. As a share, personnel expenses fell from 22.3% to 20.8% of total public expenditure, a notable move, given that this is one of the most rigid components of the budget.

Social assistance expenditures, the largest expenditure category in the budget, fell slightly, by 0.6%, to RON 146.59 billion, while spending on goods and services increased by 11.2%, to RON 59.6 billion, driven particularly by the healthcare system.

One category of the Romanian state’s expenses that increased sharply compared to last year concerned debt-servicing. Interest expenses reached RON 40.12 billion, 26.5% more than in the same period last year, and now account for 2% of GDP, partially eroding the savings made on wages. 

Investments still strong

Unlike previous episodes of fiscal consolidation in Romania, this time the reduction in the deficit was not based on cutting investments. Capital expenditure increased by RON 14.83 billion compared with last year, while 71% of this volume comes from projects financed through European funds and the PNRR, where payments increased by 60% to more than RON 20 billion.

The Romanian finance minister nevertheless drew attention to a technical element that will complicate the reading of future budget executions: starting in August, the effects of the fiscal measures adopted in July 2025 are annualized, which changes the comparison base. 

“The differences compared with last year will naturally narrow,” Nazare said on Facebook, adding that the next stage targets “the structural and sustainable consolidation of the fiscal adjustment,” through wage discipline, faster absorption of European funds and prioritization of investments.

radu@romania-insider.com

(Photo source: Alexandru Nazare on Facebook)