The budget deficit after the first 7 months ascends to 76.4 billion lei, but remains at over 4% of what the economy produces

The execution of the general budget consolidated in the first seven months of 2025 ended with a deficit of 76.44 billion lei, respectively 4.04% of GDP compared to the deficit of 71.04 billion lei, being at the same level, respectively of 4.04% of GDP related to the seven months of 2024, the officials of the Ministry of Finance sent on Thursday.

The total revenues totaled 370.77 billion lei in the first seven months of 2025, registering an increase of 11.8% (year/year).

The expenses of the general consolidated budget in the amount of 447.21 billion lei increased in nominal terms by 11.1% compared to the same period of the previous year.

The expenses with salaries totaled 99.72 billion lei, up 7.9% compared to the same period of the previous year. Expressed as a weight in GDP, personnel expenses represent a level of 5.3% of GDP, with 0.1 percentage points higher than the same period of the previous year.

The expenses with goods and services were 53.59 billion lei, increasing by 0.5% compared to the same period of the previous year. An increase is reflected in the budget of the unique national health insurance fund of 1.8% for the settlement of medicines with and without personal contribution and medicines used in national health programs.

The interest expenses were 31.71 billion lei, with 9.83 billion lei higher than the same period of the previous year.

Analysts expect the deficit to exceed 8% of GDP this year

The expenses with social assistance were 147.54 billion lei up 14.7% compared to the same period of the previous year. The evolution of these was mainly influenced by the recalculation of pensions and by the payments incurred from the state budget for the compensation of the invoices related to the consumption of electricity and natural gas.

Despite the aggressive fiscal reforms and the attempts to improve the efficiency of the public administration, the government's deficit target (7% of GDP for 2025) seems to be untouched. UniCredit analysts expect the deficit to exceed 8% of GDP this year, notes a senior report Anca Maria Negrescu, Iulia Corlanescu and Alexander Ragea. However, say the authors, the rating agencies will not penalize Romania.

It is expected that the central bank will maintain the current interest rates at the August 8 meeting, because the tax increases implemented from August 1 will lead to a strong acceleration of the inflation rate.

The budget deficit of Romania ascended to 3.68% of GDP in the first half of 2025, increasing compared to 3.62% in the same period last year, as the Government strives to balance (increasing) expenses with the slowing of income.

The deficit reached 69.8 billion lei in the first six months, representing an increase of almost 10% in nominal terms compared to the 63.7 billion lei registered in the first half of 2024, according to official data.

The increase of revenues slowed at 12.7% year by year (from 13.6% at the end of May) while the increase of expenses remained relatively stable to 12.1% annually.

The tax deterioration comes in spite of the announcement of Prime Minister Ilie Bolojan on July 9 regarding the first comprehensive consolidation package, which includes a mix of rapid discounts of expenses and measures to increase the revenues implemented from August 1.

Aggressive fiscal reforms

The package includes significant tax increases in several sectors. The standard VAT rate was increased to 21% from 19%, while the reduced VAT quotas previously applicable to essential goods, including food, drugs, energy, books and culture, were increased to 11% from 5-9%.

Additional measures include 10% increase in excise duties in fuels, alcohol, processed tobacco and high sugar products, along with higher gambling taxes and an increase in the turnover in the banking sector to 4% from 2%.

The government also introduced a 10% social insurance contribution for pensions that exceed 3,000 lei, expanding the tax base for the retirement benefits, the authors of the report say.