Romania’s 2025 budget aims to restore fiscal balance after years of widening deficits, but analysts warn that success hinges on political stability and global economic conditions, according to a new report from the Romanian Economic Monitor (RoEM), a research project of the Babes Bolyai University in Cluj-Napoca. 

The government projects a budget deficit of 7% of GDP, down from 8.6% in 2024, signaling its commitment to fiscal consolidation. However, the plan relies on moderate economic growth (2.5%) and an inflation target of 4.4%, which analysts say could be at risk from unforeseen economic shocks. 

“The budget relies on realistic assumptions, but external and internal uncertainties could derail these projections,” said Levente Szász, prorector at Babeș-Bolyai University and coordinator of the RoEM research team.

The government aims to increase revenues from 32.6% to 34.9% of GDP, mainly through higher tax collection and better absorption of EU funds. Spending will rise only marginally, from 41.2% to 41.9% of GDP, with planned cuts in public sector operational costs while preserving wages and pensions at 2024 levels. 

“A key strategy is shifting public investments towards EU-funded projects, which could offset cuts in state-funded investments and boost economic growth,” Szász added.

Despite efforts to close the fiscal gap, Romania’s tax-to-GDP ratio remains one of the lowest in the EU, trailing the EU average by over 5 percentage points. 

The RoEM report highlights that structural issues in tax collection, rather than low rates alone, are a major constraint on revenue growth. 

Analysts identify two critical risks that could jeopardize Romania’s budget targets: political instability - if the government fails to maintain fiscal discipline, the deficit could exceed 7%, undermining investor confidence and triggering credit downgrades – and external pressures - a slowdown in Germany’s economy and potential US trade tariffs could hurt Romania’s exports, adding pressure to the budget.

andrei@romania-insider.com

(Photo source: PR)