Romania’s government is trying to convince the European Commission to accept a higher budget deficit target this year than the 4.4% of GDP level previously agreed.
The government is under increasing pressure to reign in its soaring budget deficit, risking punitive measures by the European Commission if the budget deficit is not brought back under control before the end of the year.
Finance minister Marcel Bolos pleaded for a deficit of 5.5% of GDP in an August meeting with European Commission representatives in Brussels.
Romania argues is that the country has been hit by large and unforeseen expenses because of the war in Ukraine.
Romania is currently the only EU country in the so-called excessive deficit procedure, which requires the country to put in place a set of corrective measures and policies.
The European Commission visited Bucharest in July and made it clear that the budget deficit in 2023 has kept widening, contrary to the government’s plan. The approaching election year could push Romania even deeper into deficit. as revenues have been overestimated and expenditures underestimated.
The budget deficit soared in the first five months of this year, with total revenues increasing by 10.4%, and expenditure rose by a steep 17.3%.
This year’s budget foresees a deficit of 4.4% of GDP but it could exceed 6% of GDP unless a number of measures are taken urgently. This would mark a worsening from the level of 5.7% of GDP recorded in 2022, the chief economist of the National Bank of Romania (NBR), Valentin Lazea, wrote in an article published on the “Opinii BNR” blog.
In his opinion, if no measures are taken in 2023 or 2024, Romania will become “the next candidate for assistance from the International Monetary Fund, and risk a possible suspension of funds from the European Commission”.
