Romania intends to achieve a public deficit of approximately 8% of its GDP for the current year, according to the Prime Minister.
Romania's updated public deficit target for 2025, as per the European Commission's revised fiscal consolidation trajectory, is projected to be close to 8.0% of GDP in ESA terms, with no further measures beyond the first fiscal package this year.
This target, if achieved, would correspond to a significantly lower cash deficit, with most forecasts placing the cash deficit around 7.5% of GDP in 2025. The European Commission's revised trajectory aims for Romania to return to its original fiscal consolidation path by 2026, targeting a deficit of about 6.4% of GDP in both ESA and cash terms by 2026.
The forecast for 2026 still needs broader revision, but the 6.4% ESA (and cash) target could be achieved with limited additional measures on top of the first fiscal package. This reflects the impact of fiscal packages and revised expenditure trajectories defined by the European Commission, with further packages expected to support social easing and structural reforms beyond 2025.
Romania's Prime Minister, Ilie Bolojan, stated that it is impossible to cut the public deficit to 7% of GDP this year. However, the 8%-of-GDP cash deficit mentioned by PM Bolojan would be consistent with a smaller ESA gap this year.
In light of this, Romania must move closer to the target assumed in previous years. The European Commission's Spring Forecast suggests that Romania's ESA deficit would drop close to 8.0% of GDP with no further measures this year. The budget balance correlation with the net expenditures (primary deficit corrected for factors such as unemployment expenditures) is rather complex.
The government is aiming to keep the budget gap "around 8% of GDP." The second package (and possibly a third) is needed to free resources that the government could use to ease the social cost of the first fiscal package. The structural reforms in the second and third packages are aimed at preparing the ground for further fiscal consolidation until 2030.
The European Commission believes this deficit can be corrected within two years (2025-2026). Last year's public deficit was 9.3% of GDP, 1.4% above target. Under the initial 7-year fiscal consolidation plan, Romania envisaged a 6.4%-of-GDP gap in 2026 (ESA definition).
The European Commission and Ecofin avoided setting explicit deficit (ESA or cash) targets for 2025, allowing flexibility in evaluating the government's performance this year. The revised annual increase rates for the net expenditure for only 2025 and 2026 have been set. Consequently, no revision is needed in 2027 because the convergence to the initial trajectory would be reached in 2026.
In 2024, Romania reported a cash deficit of 8.65%-of-GDP while Eurostat calculated the ESA gap at 9.3% of GDP. Rating agencies had expected Romania to bring its public deficit down to 7.5% of GDP this year. The expected public deficit for 2025 is not explicitly provided by the European Commission.
The European Commission uses the annual increase of net expenditures as a benchmark to track the progress along fiscal consolidation, a benchmark that is relevant because it is under the control of the government's policies. The budget balance correlation with the net expenditures (primary deficit corrected for factors such as unemployment expenditures) is rather complex.
In summary, Romania's public deficit target for 2025 is projected to be close to 8.0% of GDP in ESA terms, with a cash deficit of about 7.5% of GDP. The government aims to return to its original fiscal consolidation path by 2026, targeting a deficit of 6.4% of GDP in both ESA and cash terms.
Business news highlights the revised public deficit target for Romania in 2025, projected to be near 8.0% of GDP in ESA terms and a cash deficit around 7.5% of GDP. The European Commission's Spring Forecast suggests this could be achieved with limited additional measures beyond the first fiscal package of this year. Meanwhile, politics also play a role as Romania's Prime Minister, Ilie Bolojan, stated it's impossible to cut the public deficit to 7% of GDP this year. In the realm of general-news, the government aims to correct the deficit within two years (2025-2026) and intends to use further fiscal packages to support social easing and structural reforms beyond 2025.
