Fiscal measures and budget deficit
Romania's budget deficit rose to 3.68% of the GDP after the first six months of this year
Roxana Vasile, 29.07.2025, 14:00
Romania’s budget deficit rose to 3.68% of the GDP after the first six months of this year, from 3.39% at the end of May, reaching almost 70 billion lei (equivalent to 14 billion euros), according to data published by the Ministry of Finance. Last year, the budget deficit was lower in the same period – almost 64 billion lei, or 3.62% of the GDP. In the first half of 2025, revenues totalled about 310 billion lei, an increase of 12.7 percent. But expenditures also increased by more than 380 billion lei, which is more than 12 percent.
The country’s budget for this year is based on a deficit of 7% of the GDP, given that Romania ended the previous year with a deficit of 9.3%, the highest in the European Union, according to Eurostat. The Ministry of Finance in Bucharest, which uses a different calculation formula than the EU, announced in 2024 a difference between expenditure and revenue of 8.65% of the GDP. However, regardless of how it is calculated, everyone agrees that this economic indicator is far too high! That is why, having just taken office at the end of June, the broad coalition government of PSD-PNL-USR-UDMR has proposed to gradually reduce the deficit through a series of fiscal reforms.
Therefore, starting August 1, Romania will implement the measures included in the first fiscal austerity package, for which the Government assumed responsibility in Parliament. VAT rates will increase, including those for basic foodstuffs, medicines, and heating. Excise duties on alcohol, tobacco, and fuel will increase, and a health insurance contribution will be introduced for pensions exceeding 3,000 lei (approximately 600 euros). In education, the number of teaching hours will increase, and the school scholarship system will be modified by reducing the number of beneficiaries. Salaries and pensions are frozen. The second package of measures is expected to focus on reforming state-owned companies, often accused of reckless spending of public money, as well as reforming local public administrations.
The government also wants measures aimed at strengthening the tax authorities’ capacity to collect revenue for the state budget and to streamline efforts to combat tax fraud and evasion. Last but not least, a package of measures is being considered to reform the much-criticized special pension system currently enjoyed by certain professional categories, including magistrates, military personnel, and police officers. The reform of this system is key to unlocking hundreds of millions of euros from the PNRR.
All these tax measures are obviously causing some discontent. The first ones to be affected are ordinary Romanians, who, according to the unions, will have to deal with a drastic drop in their standard of living starting August 1. The wave of protests that has already begun in many sectors of activity across almost the entire country is likely to grow in intensity, and strikes, including an all-out strike, cannot be ruled out in early autumn. (MI)
