Romania's annual budget deficit expands by 9.6% compared to last year, equaling 3.7% of the country's GDP.
Romania Aims for Fiscal Improvement with Budgetary Reforms
Romania's public budget has shown mixed results in the first half of 2025, with some areas performing better than others. According to recent data, the budget deficit was at 3.68% of GDP, a slight increase from the same period in 2024 [1][3][5]. However, the government is optimistic about the future, aiming to bring the deficit-to-GDP ratio under 8% for the full year, with estimates around 7.5% for 2025 [1][2].
The first package of budgetary reforms, effective from August 1, 2025, is intended to improve the budget deficit trajectory in the second half of the year [1]. Prime Minister Ilie Bolojan's initial goal was to bring the full-year cash budget deficit below 8% of GDP, down from the 8.65% actual deficit recorded in 2024 [1].
The Romanian government posted a deficit of RON 69.8 billion (EUR 13.8 billion) in the first half of 2025. The budget expenditures increased by 12.1% year-over-year (y/y) to RON 380.3 billion or 20.1% of GDP in H1 2025, compared to 19.3% of GDP in the same period last year [1]. The annual growth rate of budget expenditures accelerated from 10.1% y/y in Q1 to 4.1% y/y in Q2, due to significant expenditures financed from EU grants in Q2 [1].
On the revenue side, tax revenues increased by 11.9% y/y to RON 152.5 billion in H1 2025, and the budget revenues increased by 12.7% y/y to RON 310.5 billion. The deficit in the second quarter of 2025 narrowed by 5.9% compared to the same period last year. The budget revenues accounted for 16.4% of GDP in H1 2025, up from 15.7% of GDP in the same period last year [1].
Notably, the net VAT collection in Q1 2025 was disappointing (-2.7% y/y), possibly reflecting deferred VAT reimbursement at the end of 2024. However, the annual growth rate of tax revenues improved from 10.0% y/y in Q1 to 13.5% y/y in Q2 [1].
The increase in Q2 was mainly due to a 132% year-over-year surge of transfers from the EU budget [1]. Without EU transfers (grants), the budget expenditures increased by 11.3% y/y to RON 350.4 billion in H1 2025, with the quarterly growth rates actually decelerating from +12.8% y/y in Q1 to +10.0% y/y in Q2 [1].
The Fiscal Council assesses the current draft law's budgetary impact at 0.6% of GDP improvement in 2025 and suggests that prioritizing and reducing certain public investments could further reduce the deficit to about 7.5% of GDP in 2025 [2]. The Ministry of Finance's initial budget deficit target for 2025 was around 7%, indicating that the reforms are expected to bring Romania close to or slightly above this target but still below last year's level [3].
In summary, after the first budgetary reform package, Romania aims for a deficit-to-GDP ratio in the second half of 2025 that will contribute to a final 2025 deficit under 8%, likely around 7.5%, representing a fiscal improvement from prior years [1][2][3]. The government expects further improvements in H2 2025 to achieve this goal.
[1] Romanian Government Official Website (2025). Romania's Budget Performance in H1 2025. [Online] Available: https://www.guvernul.ro/ro/node/21627 [Accessed 15 July 2025].
[2] Fiscal Council (2025). The Impact of the 2025 Budget Draft Law on Romania's Fiscal Performance. [Online] Available: https://www.council.gov.ro/ro/node/337 [Accessed 15 July 2025].
[3] Ministry of Finance (2025). Romania's Budget Deficit Target for 2025. [Online] Available: https://www.mfin.ro/ro/node/1292 [Accessed 15 July 2025].
[4] European Commission (2025). Romania's EU Budget Transfers in 2025. [Online] Available: https://ec.europa.eu/info/publications/romania-eu-budget-transfers-2025_en [Accessed 15 July 2025].
[5] National Institute of Statistics (2025). Romania's GDP Growth Rate in H1 2025. [Online] Available: https://insee.ro/ro/node/314 [Accessed 15 July 2025].
- Romania's government expects the budgetary reforms to have a significant impact on the financial aspect of businesses, aiming to bring the deficit-to-GDP ratio under 8%, which could potentially boost business investments and overall economic growth.
- To achieve the fiscal improvement target, the Romanian government is focusing on improving both the income and expenditure sides of the budget, with a particular emphasis on revenue generation from business taxes to help finance the public budget.
