Romania to revise 2025 budget with deficit of 8.4% of output next week, PM says

Romania's broad coalition government will approve a budget revision next week, after agreeing new deficit targets for this year and next with the European Commission, Prime Minister Ilie Bolojan said on Wednesday.

The EU state is under pressure to reduce the highest fiscal deficit in the bloc to maintain the country on the last rung of investment grade and unlock billions of euros of EU funds.

It approved a first package of tax hikes in July and is waiting until October for the country's top court to rule on challenges brought against a second set of measures.

Bolojan told reporters on Wednesday that Brussels had agreed a deficit target for this year of 8.4% of economic output compared with an initial figure of 7%. The deficit is then expected to fall to "a little over 6%" in 2026, he said.

"That is if we maintain fiscal discipline and the pace of reforms, because we will have very large pressures on the investment side," Bolojan said.

GOVERNMENT NEEDS TO FIND FUNDS FOR INVESTMENTS

Romania has contracted almost double its allotted share of EU recovery funds and will need to provide funding for investment works in advanced stages. It also has to find funds for investments backed entirely by the state budget.

The government will file a request for a fourth tranche of European Union recovery funds of around 1 billion euros ($1.17 billion) after a meeting of EU finance ministers in November, Bolojan said.

A broad coalition of four pro-European parties took power at the end of June, but the parties have repeatedly clashed over the deficit and have yet to agree on planned public administration job cuts.

Bolojan said state spending needed to be cut further to reduce the country's large borrowing costs, with debt interest rate costs nearing 11 billion euros this year.

He also said he did not believe other taxes should be hiked from next year, but the focus should shift to spending cuts.

Fiscal measures taken so far have had a slight contractionary impact on the Romanian economy, Bolojan said, but he did not expect recession next year.

($1 = 0.8523 euros)