Discussions regarding a potential public deficit surpassing 8% of GDP for this year are ongoing between the Romanian Finance Minister and the European Commission.
The Romanian government is set to undertake a significant revision of its budget, known as the budget rectification. This revision aims to cover essential expenses, European funds, and maintain the flow of investments and funds.
The discussions surrounding the budget rectification will take place within the coalition and during an informal Ecofin meeting this weekend. The government seeks to cover expenses that were partially covered by the current budget through the upcoming budget rectification.
The exact new deficit target is still under negotiation. Finance Minister Alexandru Nazare has indicated a possible new target for Romania's fiscal deficit in 2025, before negotiations with the European Commission, at around 3% of GDP.
The budget rectification will primarily focus on expenses related to European funds, whether it is cohesion funds or the PNRR. This decision is necessary due to the realization that the budget figures do not account for several necessary expenditures.
In 2024, Romania's public deficit reached 8.65% of GDP under cash terms and 9.3% of GDP under ESA terms. The budget presented and approved at the beginning of the year provided for a deficit of RON 134.6 billion at a GDP of RON 1,912 billion, based on an economic growth of 2.5%.
However, calculations after the first half of the year reveal that the budget figures do not account for several necessary expenditures, making the budget rectification necessary.
Rating agencies, while affirming Romania's fragile sovereign rating just above the junk area with a negative outlook, expressed confidence that Romania can bring its public deficit under 6.4% of GDP in 2026. The European Commission is scheduled to review Romania's budgetary conduct under the Excessive Deficit Procedure on October 15.
Despite the uncertainty surrounding the new deficit target, the budget rectification will be a significant revision of the budget initially presented and approved at the beginning of the year. Discussions regarding the new deficit target will also take place in the coalition and during an informal Ecofin meeting this weekend.
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