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6.9 Budget and Debt – Romania
Romania’s budget deficit – wider than 8% of GDP in 2024 – is certainly the key macroeconomic issue faced by the country. The public debt to GDP ratio, 13.5% before the Covid-19 crisis, surpassed 50% already and will predictably surpass the 60% threshold even under perfect implementation of the fiscal consolidation strategy. Not surprisingly, Fitch has already cut the outlook on the country’s fragile sovereign rating (BBB-) as the political uncertainty added to the already slow fiscal consolidation plans.
Romania’s public debt-to-GDP ratio climbed to 54.4% at the end of September 2024, up from 52.7% in August and 48.8% at the close of 2023, according to the latest official data. The figure might see downward correction as updated quarterly GDP data is released. But it will remain significantly above 50%.
The latest figures place Romania’s indebtedness above the 53.2% level projected by S&P for the end of 2025. The European Commission's November Autumn Forecast anticipates a 52.2% debt-to-GDP ratio for 2024, rising to 56.1% by 2025 and 59.7% by 2026, barring any corrective fiscal measures.
Romania's seven-year fiscal consolidation plan envisages 52.2% of GDP public debt at the end of this year followed by 55.7% at the end of 2025 and 58.5% at the end of 2026, predicting the debt will surpass 60% of GDP by 2027 and remain above this threshold through 2031.
The European Commission endorsed the 7-year fiscal consolidation programme (longer than typically allowed under the Excessive Deficit Procedure) proposed by the outgoing government before the December 1 parliamentary elections. Romania promises to bring the deficit before 3% of GDP in 2031, under the plan. But even this mild fiscal consolidation strategy is clouded by political uncertainty, after the parliamentary and presidential elections in November-December.
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