Romania's budget shortfall escalates beyond 4% within the initial seven months of 2025

Romania's economy has shown a mixed performance in the first seven months of 2025, with some sectors experiencing growth while others face challenges.

According to the latest data, expenditures on goods and services for the period amounted to RON 53.59 billion (+0.5%), while total revenues reached RON 370.77 billion, marking a 11.8% increase year-on-year.

One of the bright spots in the economy has been the increase in excise revenues, which amounted to RON 26.67 billion, a 13.2% increase. This growth can be attributed to the elimination of fiscal facilities granted to employees in certain sectors, such as construction, agriculture, food industry, and software development.

Collections from income and salary tax also saw a significant increase, with RON 35.31 billion collected, a 21.3% rise from the previous year. The increase in dividend tax collections (+84.0%) played a significant role in this growth.

However, the consolidated budget deficit for the same period has increased to 4.04% of GDP, up from 3.68% at the end of June. This increase can be partly explained by the rise in expenditures, which recorded an increase of 0.7% compared to the same period of 2024.

Personnel expenditures amounted to RON 99.72 billion (EUR 20 billion), up 7.9% compared to the first seven months of the previous year, representing 5.3% of GDP. Social assistance expenditures were RON 147.54 billion (+14.7%), and subsidy expenditures were RON 7.66 billion, primarily for passenger transport subsidies, support for agricultural producers, and the compensation scheme for electricity and natural gas consumption of non-household consumers.

Interest expenditures were RON 31.71 billion (+RON 9.83 billion), and insurance contributions increased by 10.8% to RON 121.07 billion.

Despite these challenges, Romania's economy has continued to attract international attention. An International Monetary Fund (IMF) mission, led by Joong Shik Kang, will visit Bucharest between September 3-12 to analyse the recent developments of the Romanian economy.

Net VAT collections totaled RON 69.99 billion, marking a 5.7% increase, and non-fiscal revenues reached RON 34.71 billion, an 8.9% increase. The amounts reimbursed by the European Union for payments and donations totaled RON 28.62 billion, a 33.6% increase.

Profit tax collections totaled RON 26.17 billion, an 11.1% increase year-on-year. The total expenditures of the consolidated general budget for the first seven months of 2025 increased by 11.1% compared to the same period of the previous year, amounting to RON 447.21 billion.

It is worth noting that 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.

As the year progresses, it will be interesting to see how Romania's economy continues to evolve and whether the government can address the challenges facing the consolidated budget deficit.

Romania's budget shortfall escalates beyond 4% within the initial seven months of 2025