Romania's general government budget deficit reached RON 153 billion (over EUR 30 billion) in 2024, nearly 70% more compared to 2023, according to data published by the Finance Ministry.

The deficit-to-GDP ratio reached 8.65% based on the estimated 2024 GDP (RON 1,765 billion), up from 5.61% in 2023 and compared to an initial 5% target.

However, subtracting the effects of insufficient absorption of EU grants under RRF and MMF (likely to be reversed in the future) and the investments from the national budget, the deficit rose to only 2.8% of GDP - still more compared to 2.1% in 2023 while the fiscal consolidation rate for the coming seven years should be around 0.7% of GDP. Particularly, in 2025, the deficit should be reduced to 7% of GDP from 8.65% in 2024.

Revenues increased by 10.4% y/y (+16.2% y/y for tax revenues) to RON 575 billion, or 32.6% of GDP in 2024 – marginally up from 32.4% in 2023.

Expenditures rose nearly twice as fast: by 19.1% y/y to RON 727 billion or 41.2% of GDP - significantly more compared to 38.1% in 2023.

The tax revenues have performed rather well as the revenues from profit and income tax advanced at rates of over 20% y/y (+23.5% and +21.4% y/y, respectively). Net VAT collections rose more modestly but still at a decent rate of 15.9%, while the excise duties rose by 24.3% y/y.

However, some categories of expenditures rose at uncontrolled rates. 

The payroll in the budgetary sector surged by 24% y/y to 9.3% of GDP, and the expenditures for goods and services by 21% y/y to 5.3% of GDP. The social security expenses rose by only 17% y/y, but they account for a significant 12.7% of GDP. 

Partly, the shocking 2024 budget deficit was caused by the operations with funds from the European Union: expenditures made more than the transfers. This was due to the below-target disbursement of funds under the Recovery and Resilience Facility (RRF) and possibly under the Multiannual Financial Framework (MFF). In principle, this gap should be closed in the coming years as the funds for the projects financed under these schemes are disbursed.

In 2024, the expenditures made for projects financed under non-reimbursable funds (grants) exceeded the disbursements by 1.3% of GDP (compared to 0.8% of GDP in 2023). This means that the deficit, without this influence, was only 7.3% of GDP – still enormous and up from 4.8% of GDP in 2023.

As a technical note, we treated in the analysis the expenditures under EU schemes involving loans as investments from the national budget – since the loans from the European Union, although at preferential interest rates, surface not on the budget revenues side but on the public debt side. 

Therefore, the investments from the national budget (including those financed under EU loans, also known as reimbursable EU funds) reached 4.5% of GDP in 2024, up from 2.7% in 2023. 

The deficit, excluding the investments, thus reached 2.8% of GDP in 2024 – up from 2.1% in 2023.

Total investments from the national budget and EU grants reached 7.8% of GDP, up from 7.6% of GDP in 2023. Notably, this future includes the military spending.

iulian@romania-insider.com

(Photo source: Ungureanu Vadim/Dreamstime.com)