Revised budget target of 7.1% of GDP by Romanian FinMin deemed unattainable and unrealistic
The Romanian government has revised its target for the 2025 budget deficit, with Finance Minister Alexandru Nazare announcing that the new target will not start with a 7, suggesting it will be at least 8% of GDP.
This revised target comes after the 7.1% of GDP target set by the past government for 2025 budget planning was deemed unrealistic. The government faces additional challenges in keeping the deficit this year within acceptable limits.
The government's first half-year deficit reached 3.68% of GDP, and despite some narrowing in Q2, the gap widened year-over-year by 9.6% in nominal terms. However, the government expects budgetary reforms and measures in the second half of the year to improve the deficit, aiming for a full-year deficit under 8% of GDP, compared to 8.65% last year.
The revised target of approximately 8% of GDP or slightly above reflects realistic fiscal pressures and ongoing adjustments by the Finance Ministry under Alexandru Nazare. The deficit in 2024 was 9.3% of GDP, the highest in the EU, prompting the government to adopt restrictive fiscal measures.
Minister Nazare announced that consultations with all ministries for the budget revision began several days ago. No decision on supplementing the individual budget of any institution or ministry can be taken without a broad image of the entire public sector.
Several institutions and ministries were earmarked with visibly insufficient funds for functioning the entire year under the current budget planning. The funding for the A7 motorway, as requested by the Social Democrats (PSD), has been secured from grants under the Recovery and Resilience National Plan (PNRR).
The Romanian government owes approximately RON 6-7 billion (EUR 1.2-1.4 billion, or over 0.3% of GDP) to electricity suppliers under the price capping scheme. Historically, Romania displays wide deficits in the last quarter of the year due to public works contract payments.
The revised budget deficit target for 2025 marks a significant shift in Romania's fiscal strategy, aiming to strike a balance between economic growth and fiscal responsibility. The government's efforts to address the deficit will be closely watched by both domestic and international stakeholders.
- The revised budget deficit target for 2025 will be a point of interest for stakeholders in the realm of finance, business, and general-news, considering the realistic fiscal pressures and the aim to strike a balance between economic growth and fiscal responsibility.
- The ongoing budget adjustments by the Finance Ministry under Alexandru Nazare, along with the subsequent discussions with various ministries, could have implications for not only the country's budget planning but also for the broader world of politics and economy.
