The government of Romania published on January 30 the budget plan for 2025, with a deficit target of 7.04% of GDP. 

The public deficit would thus drop by 13.5% y/y from RON 153 billion in 2024 to RON 135 billion in 2025.

The fiscal consolidation from 8.65% of GDP would be primarily achieved on the revenues side, with more robust transfers from the EU budget. However, expenditures would also contribute, as the public payroll and expenses for goods and services would increase at more moderate rates.

"The draft budget for 2025 is prudent, considering an estimated economic growth of 2.5%, based on investments, agriculture, construction, services, and industrial growth. At the same time, we are concerned about protecting people's purchasing power and quality of life. We estimate an increase in the average salary by 6.1%, a percentage that exceeds the forecasted inflation rate, an increase in the number of employees, but also the maintenance of some forms of support for pensioners and the payment of energy bills by people with low incomes," prime minister Marcel Ciolacu said during the meeting with social partners, as quoted by Economedia.ro.

Revenues are expected to rise by 16.2% y/y to RON 667.6 billion or 34.9% of GDP from 32.6% of GDP in 2024. 

It is quite an ambitious target, but the more consistent disbursements from the EU budget are expected to contribute substantially: they should more than double (+104% y/y) to RON 87.7 billion or 4.6% of GDP from only 2.4% of GDP in 2024 (a figure that does not match the 2024 budget execution data published this week, although the total revenues in the 2025 budget plan matches total revenues in 2024 budget execution).

VAT collection is likely to rise by 12.4%, or by 7.7% y/y in real terms (for average 4.4% headline inflation) – well above the more modest expected rise in wages of 6.1% y/y (+1.7% y/y in real terms). The projection might thus be slightly optimistic on this side.

Expenditures are planned to rise by only 10.3% y/y to RON 802.2 billion or 41.9% of GDP from 41.2% in 2024. 

Public payroll would increase by only 3.0% y/y (less than the average inflation rate) and the expenditure on goods and services by 1.1% y/y. 

On the contrary, investments (from the national budget only) will rise by 26% y/y to RON 149.7 billion or 7.8% of GDP from 6.7% in 2024.

iulian@romania-insider.com

(Photo source: Rochu2008/Dreamstime.com)