The Cabinet in Bucharest will adopt the first austerity measures to reduce Romania’s budget deficit on Monday. The measures were discussed at a government meeting and include cuts to certain bonuses.
Romania’s budget deficit reached 9.3 per cent of GDP in 2024. The European Commission has given a deadline of October 15 to assess measures to reduce the deficit and limit spending to 2.8 per cent in 2025 and 2.6 per cent in 2026. This year, spending is expected to grow by 6.6 per cent.
The three major financial rating agencies have placed Romania at the bottom of their list of countries of interest to investors, with a negative outlook. A little more and the country will fall into the category of countries not recommended for investment.
Corrective measures were supposed to be taken by April 30, but the annual progress report was not submitted, and budget expenditures grew much faster than recommended. The new government has stated that reducing the budget deficit is a priority. The package of measures to reduce government spending will include a reduction of the three VAT rates to two.
Additional taxation of banks and gambling, higher excise duties on petrol and alcohol, and increased contributions to health and pension funds are being considered.
In 2026, property tax will be increased in line with market values, and capital gains tax and dividends will be raised. Cuts to the state apparatus and benefits for officials have begun. For example, the government wants to abolish allowances for computer work and for work with European funds, even when this work results in the loss of these funds, and to cut education spending: the budget pays a billion euros just for student scholarships, promises to abolish special pensions and reform state-owned enterprises.
On June 20, Romanian President Nicușor Dan officially appointed Ilie Bolojan as the country’s prime minister.
