Page 140 - bne IntelliNews SE Outlook Regions 2024

RON86.6bn (€17.3bn) – 5% of the projected GDP, down from 5.9% of GDP in 2023.
After it missed the deficit target by 1.5% of GDP in 2023 — assuming it meets the latest 5.9% of GDP target — the government implemented in 2023 a fiscal corrective package criticised by analysts and the IMF for its lack of coherence, which further eroded its credibility. With a heavy burden created by supplementary expenditures (public sector payroll, public pensions and investments planned to support growth) the 2024 deficit target depends on two operations that are very delicate in a year with multiple elections: cutting unnecessary public spending and tax evasion.
The fiscal consolidation, nearly 1% of GDP, will be achieved by increasing the revenues-to-GDP ratio to 33.8% from 32.9%. In comparison, the expenditures will remain at 38.8% of GDP, according to the document leaked to the media.
In other words, revenues will increase by 13% y/y to RON586bn (the executive expects significant transfers under the Resilience Mechanism but also more efficient tax collection) and public spending by only 9% to RON673mn.
The budget is drawn up based on an underlying scenario that includes 3.4% GDP growth (2% in 2023), driven by a 4.1% increase in domestic demand (+1.4% y/y in 2023). The gross fixed capital formation will make a slightly smaller contribution to the growth, at 1.7pp (1.4pp in 2023) while consumption remains the main growth driver.
The medium-term fiscal scenario sketched by Romania’s government along with the 2024 budget envisages that the 3%-of-GDP deficit target will not be met before 2027.
Pension reform in Romania raises medium-term fiscal risks, a credit negative, but reduces long-term cost pressures, according to a research note published by Moody’s.
The recalculation of pensions will cost around 0.6% of GDP in 2024 and 1.7% of GDP in 2025, with savings mainly accruing in the 2030s and beyond, the rating agency estimates.
Moody’s projected a 5.4%-of-GDP deficit for 2024 and a 4.4%-of-GDP deficit one year later, under the latest country update on November 3. Including the new Pension Law effects, Romania’s budget deficit would stay at around 6% of GDP for the coming two years.
Romania’s public debt reached RON799.3bn (€152.6bn) at the end of September, RON92.7bn more compared to the end of 2022, the finance ministry announced.
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