Romania’s Budget Deficit in 2023

The Romanian Government is doing the final math for the year 2023.

Roxana Vasile, 31.01.2024, 14:07

The PSD-PNL coalition government in Bucharest is making final calculations for 2023: higher expenses generated a deficit of around 90 billion lei (18 billion euros), accounting for 5.68% of the Gross Domestic Product. The deficit is slightly lower as a percentage of the GDP compared to the one recorded in 2022, but it is more than one percentage point above the figure considered when building the budget – at the beginning of last year, the Executive had set out with a target of 4.4%, i.e. 70 billion lei. However, while the revenues were somewhat in line with the graph, the budget slippage in the ʹspending chapter accounted for some 20 billion lei.

According to the Ministry of Finance, revenues stood at over 521 billion lei, up by 13%. Their dynamics were mainly supported by the money coming from European funds, salary and income tax and insurance contributions. As a percentage of the GDP, revenues stood at 32.9%. On the other hand, spending exceeded 611 billion lei, and as a percentage of the Gross Domestic Product, they maintained their share at the level of 38.6%, same as in 2022.

Ziarul Financiar notes the fact that, according to the figures for 11 months, the budget deficit was 4.64% of the GDP, which would mean that the Government deepened it at the end of 2023, in December. Be that as it may, the first topic on the agenda of the discussions these days between the Romanian authorities and a delegation of the International Monetary Fund is precisely about the budget deficit. Romania has pledged to gradually reduce it to 3%, a limit stipulated by the European treaties.

Although it is far from this target, the good news is that the deficit of 5.68% in 2023 is still below that anticipated by the European Commission in its autumn forecast, i.e. 6.3 percent, but also beyond the expectations of many analysts, who believed it would be 6%. Lets remember that Romania has been under an excessive deficit procedure since 2020, when it set out to return to less than 3% in 2024. However, the pandemic and the war in neighboring Ukraine followed, as a result Bucharest was forced to negotiate with the European Commission, for 2023, a target between 5.5 and 5.7% of the GDP.

For 2024, the countrys budget is built on an anticipated deficit of 5 percent. Meanwhile, in order to keep it under control, the PSD-PNL Government has already taken a series of unpopular measures – tax increases have come into force or new ones have been introduced, and vouchers and bonuses have been frozen. The unions warned in the fall of last year that protests would follow, and this is indeed happening right now. (MI)