On 18 February 2025, the Romanian Parliament approved the 2025 budget, which was supposed to be adopted at the end of 2024 but was postponed at that time to avoid influencing the presidential and parliamentary elections in November. The country was not able to elect its president and form a government in the recent parliamentary elections on 1 December 2024, as no single party achieved a majority, leading to the formation of a pro-European grand coalition government.
The election was then annulled by Romania’s Constitutional Court on 6 December 2024, due to allegations of Russian interference aimed at benefiting independent candidate Călin Georgescu who secured the most votes in the first round. Despite the political uncertainty and tensions following Romania’s 2024 elections, the Romanian Parliament passed the 2025 state budget in February 2025.
To provide political stability in the absence of a clear majority party and budget approval before the re-run of the presidential election, due in May 2025, the Social Democratic Party and the National Liberal Party formed a coalition government. The upcoming presidential elections will likely prolong this uncertainty, potentially hindering fiscal consolidation efforts. The deficit’s persistence, driven by rapid expenditure growth in areas such as public sector salaries and unfunded pension increases, puts significant strain on public finances.
The 2025 budget illustrates the government’s commitment to balance the fiscal deficit with the necessary investments to support economic growth, infrastructure modernisation, public services and sustainability in 2025. The budget focuses on key areas of development such as reducing the fiscal deficit through fiscal policies, increasing public investment in infrastructure development, attaining a sustainable green transition and providing tax reforms for business. Even with projected reductions, the country’s deficit remains high, raising concerns about long-term fiscal sustainability.
The 2025 budget includes an expenditure of 802,170 billion lei ($176.7 billion), representing 41.9% of GDP – an increase of 10.3% compared to the expenditure of 727.3 billion lei in the 2024 Budget. Major shares in total expenditures in the 2025 budget are social assistance (30.2% of total expenditure), personnel expenses (21.1% of total) and investment expenditures (18.7% of total). Personnel expenses expenditure includes a total allocation of 169.7 billion lei. The personal expenses include an allocation of 169.5 billion lei while 149.7 billion lei was allocated for investment expenditure (including public spending for the development of key projects). The budget also increases the expenditure in major ministries compared to the 2024 budget such as the Ministry of Energy, which increased by 153% compared to the 2024 budget allocation, followed by the Ministry of Environment (55% increase in 2025 budget), health (35%), transport (20%) and European funds (38%).
The government projects a budget deficit of 7% of GDP in 2025, down from 8.6% in 2024, reflecting its commitment to fiscal consolidation. However, the plan focuses on moderate economic growth of 2.5% and an inflation target of 4.4% in 2025, which could be threatened by unexpected economic shocks, such as a global recession, and a fall in exports, potentially leading to lower tax revenues, which could raise the debt burden and supply chain constraints – all potentially leading to postponement of major projects.
The 2025 budget has been developed to tackle fiscal deficit through the Deficit Reduction Plan, which focuses on spending cuts, increasing state revenues through tax hikes and capping public sector wages and pensions. Post-presidential and parliamentary elections in Romania in November and December 2024 triggered a spending surge that is estimated to push the country’s 2024 budget deficit to 8.6% of GDP. Thus, Romania plans to lower its deficit to 2.5% by 2031 to restore the nation’s fiscal credibility, which requires it to be below the European Union (EU)’s 3% GDP benchmark by that year. Through the budget, the government is raising tax on company dividends to 10% from 8% from January 2025. In early 2025, the government announced intentions to raise 62.5 billion lei through international bond sales. This initiative aims to reduce the fiscal deficit, which is among the highest in the EU.
The other focus areas in the recent budget are healthcare, education, social development and transport infrastructure development. Through the country’s National Recovery and Resilience Plan, the government has allocated 37.7 billion lei for transport infrastructure development, which includes 21.6 billion lei designated for electrifying and upgrading the rail system and 17 billion lei for the development of roads and highways. Similarly, the budget also prioritises the ongoing major transport infrastructure project which includes the construction of the M6 line of the Bucharest Metro Expansion project which will connect Gara de Nord to Henri Coandă International Airport and the Constanța port enhancement project.
In the 2025 budget, the government significantly increased its energy budget to support the development and modernisation of its energy infrastructure. The Ministry of Energy’s budget allocated 14.7 billion lei to achieve its energy transition targets. Around 1.5 billion lei is designated to support the compensation cap scheme, which has ensured affordable energy prices for consumers, while 75% of the energy budget is allocated to vital investments aimed at providing safe, affordable and clean energy. These investments focus on projects funded through non-reimbursable funds, including the National Recovery and Resilience Plan and the Modernisation Fund.
“Amid political uncertainty, Romanian government approves 2025 budget plan” was originally created and published by World Construction Network, a GlobalData owned brand.
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