Moody’s on Romania’s budget deficit
According to Moody's, Romania can reduce its budget deficit if it implements the fiscal measures announced by the government
Sorin Iordan, 11.07.2025, 14:00
The fiscal measures recently adopted by the Romanian government are “an important step” towards balancing the budget, according to Moody’s. However, the international rating agency warns that any deviation from the plan could undermine stabilization efforts and result in a downgrade of the country’s sovereign rating, which is currently “stable.” Therefore, if all three packages of measures announced by Prime Minister Ilie Bolojan are fully implemented, Romania’s fiscal deficit could reach 7.8% of the GDP at the end of this year and 6.1% in 2026. In its published report, Moody’s stresses that the Bucharest government should reduce the deficit and slow the growth of public debt faster than previously anticipated.
According to the analysis, the fiscal package adopted this week will generate a consolidation of approximately 0.6% of the GDP for 2025, with the significant contribution coming from the increase in VAT rates starting August 1, when excise duties on fuel, alcohol, and tobacco will also be increased. For 2026, Moody’s estimates a budget consolidation of about 3% of the GDP, as a cumulative effect of the measures adopted in 2025 and those that will come into force in 2026. Prime Minister Ilie Bolojan explained that the second package of measures, scheduled for January 1, 2026, will contain measures relating to special pensions, combating tax evasion, and reforming state-owned companies and local and central government.
Ilie Bolojan:
“We are talking about reforming special pensions by eliminating exceptions, calculating pensions correctly, and setting the retirement age at the general age. Reforming state-owned companies and autonomous authorities; we will restructure autonomous authorities such as ASF, ANCOM, and ANRE. We will reduce the number of members and allowances of boards of directors and make activities and contracts more transparent. Reforming the local and central administration by resizing the budgetary apparatus, through decentralization and digitization, combating tax evasion and public money fraud, through legislative changes and by speeding up access to European funds and prioritizing investments with a direct impact on development.”
The spending cuts and tax optimizations decided by the government have sparked discontent among trade unions in almost all sectors of the economy. For days, union members have been organizing protests to express their concern about the harmful effects that these fiscal measures will have on people’s purchasing power and warning that they may even resort to general strikes if their position is not taken into account by the government. In this context, the opposition in the Bucharest Parliament has filed a motion of no confidence against the cabinet led by Ilie Bolojan.
The document, which was presented in the plenary session of parliament claims, among other things, that the measures taken by the government will lead to recession and a decline in living standards, and that the cost of austerity is borne solely by Romanians. For the executive to be dismissed, the motion of no confidence must gather the votes of half plus one of the number of senators and deputies, i.e. 233. (MI)
