Fiscal Balance in Romania

Romania Fiscal Balance | Economic News & Forecasts

Romania - Fiscal Balance

Parliament approves larger-than-expected cut to VAT despite EU and IMF warnings

Romania’s parliament approved far-reaching tax cuts on 24 June in spite of warnings from key international bodies that the move could trigger an unsustainable increase in the country’s fiscal deficit next year. The key measure consists of the reduction of the general value-added tax (VAT) from 24% to the 2011 rate of 19%, which is a 1.0 percentage point deeper cut than outlined in earlier proposals. Other measures comprise the elimination of special levies and the reduction of excise duties. The approved tax package will be included in Romania’s 2016 budget and is planned to be effective from 2016 through 2019. However, according to a recent statement from Prime Minister Victor Ponta, the government is currently discussing the possibility of enacting the approved measures this year.

At 24%, Romania’s VAT is one of the highest rates in the European Union (EU) and the recently-approved tax cuts form part of a wider initiative to loosen fiscal policy and partly reverse the tough austerity policies that were implemented in the aftermath of the 2009 financial crisis. This year, Romania’s government lowered the VAT on food items from 24% to 9% and increased both the minimum wage and state subsidies for children.

Prior to the parliament’s decision, the International Monetary Fund (IMF) and the EU cautioned that such fiscal easing threatened to undermine the country’s fiscal consolidation efforts and pointed out that Romania had not examined the sustainability of the plan thoroughly enough. Romania managed to reduce its fiscal deficit from 8.9% of GDP in 2009 to 1.5% of GDP last year. According to the Finance Minister, the new fiscal measures will widen Romania’s fiscal deficit to up to 2.9% of GDP in 2016, which by far exceeds the 1.2% of GDP that had been projected. The European Commission recently warned that the approved changes in the tax code could drive next year’s fiscal deficit above the EU’s threshold of 3.0% of GDP.

In breaking the fiscal targets that had been agreed on with the EU and the IMF, Romania risks not completing a EUR 4 billion precautionary loan agreement that ends in September and therefore may not achieve a new deal with the two bodies. Moreover, breaking the EU’s fiscal rules can jeopardize Romania’s envisaged entry to the Euro area in 2019. However, Romania claimed that these concerns were unjustified, arguing that the fiscal easing would boost economic growth and help fight tax evasion. The government also pointed out that the country’s tax revenues were higher than expected in the first months of this year.

Met the why particular Consensus Forecast panelists are still taking the parliament’s latest VAT cut into account and see the fiscal deficit widening to 2.0% of GDP in 2015. For 2016, they project a fiscal deficit of 2.2% of GDP.

Romania - Fiscal Balance Data

2013  2014  2015  2016  2017  
Fiscal Balance (% of GDP)-2.1  -1.3  -0.8  -3.0  -2.9  

Sample Report

5 years of economic forecasts for more than 30 economic indicators.


Romania Facts

Bond Yield4.940.23 %Jan 30
Exchange Rate4.16-0.34 %Jan 30
Stock Market7,044-0.59 %Jan 30

Sample Report

Get a sample report showing our regional, country and commodities data and analysis.


Request a Trial

Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.

Sign Up

Economic News

  • Romania: Economic growth down marginally in Q4 2018

    April 8, 2019

    A second estimate released on 8 April by the Statistical Institute (INSSE) confirmed that the economy grew 4.1% in the fourth quarter over the same period a year earlier, a notch below the third quarter’s 4.2% expansion.

    Read more

  • Romania: Central Bank stays put in April

    April 2, 2019

    At its monetary policy meeting held on 2 April, the National Bank of Romania (NBR) kept the policy rate unchanged at 2.50%.

    Read more

  • Romania: Growth eases through Q4 2018

    March 7, 2019

    A comprehensive estimate released by the National Institute of Statistics revealed the economy expanded 4.1% in the fourth quarter over the same period a year earlier, decelerating from the third quarter (Q3 2018: +4.2% year-on-year).

    Read more

  • Romania: Growth moderates in Q4

    February 14, 2019

    According to a preliminary estimate released by the National Institute of Statistics on 14 February, the economy expanded 4.1% in the fourth quarter over the same period last year, slightly decelerating from the third quarter (Q3: +4.2% year-on-year).

    Read more

  • Romania: Inflation stable in January

    February 13, 2019

    Consumer prices jumped 0.8% over the previous month in January, following December’s 0.2% month-on-month increase.

    Read more

Search form