Budget Deficit Exceeds 30B RON, 1.58% of GDP in Two Months

Romania’s Budget Deficit Exceeds 30 Billion RON, 1.58% of GDP After Two Months, Says Ministry of Finance.

Romania’s budget deficit has surpassed 30 billion RON, representing 1.58% of GDP after the first two months of the year, the Ministry of Finance announced on Wednesday.

For comparison, the budget deficit in the first two months of 2024 stood at 28.99 billion RON, or 1.64% of GDP.

Revenues

Total revenues amounted to 89.66 billion RON, up 3.5% year-on-year (y/y), driven by an increase in current revenues—mainly salary and income tax, social security contributions, and excise duties. At the same time, net VAT collections declined due to higher VAT refunds in the first two months of the year (y/y), along with lower EU funds absorption. As a share of GDP, total revenues decreased by 0.22 percentage points due to the drop in EU funds, while current revenues remained almost constant.

Income tax revenues totaled 11.00 billion RON, marking a 42.2% increase y/y, mainly due to a significant rise in dividend tax collections (+179.0%), resulting from dividends distributed in 2024, taxed at an 8% withholding rate. Positive trends were also observed in (i) salary tax revenues (+18.2%), which exceeded the growth of the wage fund in the economy (+12.4%¹). This was influenced by the removal of tax exemptions for employees in the construction, agriculture, food industry, and IT sectors (effective February 2025). (ii) Pension income tax revenues also rose by 16.7%.

Social security contributions totaled 33.16 billion RON, up 9.7% y/y, but below the wage fund growth rate. The more moderate growth in these revenues was partly due to a higher effective transfer to the second pension pillar compared to the same period last year (3.39 billion RON in Jan-Feb 2025, compared to 2.39 billion RON in Jan-Feb 2024).

Net VAT collections amounted to 19.69 billion RON, down 3.2% y/y. This decline was primarily due to an increase in VAT refunds compared to the same period last year (6.08 billion RON in Jan-Feb 2025 vs. 4.43 billion RON in Jan-Feb 2024), as well as a high base effect.

Excise duty revenues totaled 6.97 billion RON, up 11.4% y/y, supported by strong growth in energy product excise collections (+22.5%). Meanwhile, excise revenues from tobacco products grew at a more moderate pace of 4.1%. Monthly excise revenue collection tends to show higher volatility due to businesses’ fiscal warehousing policies for excisable goods.

Non-tax revenues amounted to 6.63 billion RON, similar to the level recorded in the first two months of 2024.

The sums reimbursed by the European Union for payments made and donations totaled 4.41 billion RON, down 46.4% year-on-year (y/y).

Expenditures

Consolidated general budget expenditures amounted to 119.90 billion RON, a nominal increase of 3.7% compared to the same period last year. As a percentage of GDP, expenditures for 2025 decreased by 0.2 percentage points compared to the same period in 2024, from 6.5% of GDP to 6.3% of GDP.

Personnel expenditures totaled 28.10 billion RON, up 16.2% compared to the same period last year. As a percentage of GDP, personnel expenditures represent 1.5% of GDP, 0.1 percentage points higher than the same period last year.

Expenditures for goods and services amounted to 14.74 billion RON, up 2.4% compared to the same period last year. This increase reflects the budget of the National Health Insurance Fund, which rose by 16.3% to cover the cost of medications with and without personal contributions, as well as medications used in national health programs.

Interest expenses amounted to 10.06 billion RON, an increase of 3.39 billion RON compared to the same period last year.

Social assistance expenditures totaled 42.78 billion RON, up 10.4% compared to the same period last year. This increase was mainly influenced by the implementation of pension recalculation measures in the public system starting September 1, 2024, in accordance with Law No. 360/2023 of November 29, 2023, regarding the public pension system. Social assistance expenditures were also impacted by state budget payments to compensate for electricity and natural gas bills, amounting to 528.62 million RON for the first two months of 2025.

Subsidy expenditures amounted to 1.75 billion RON, primarily for subsidies related to passenger transport, support for agricultural producers, and the compensation scheme for non-household electricity and gas consumers (69.61 million RON).

Other expenditures totaled 3.25 billion RON, mainly covering student scholarships, support for religious denominations, other civil compensation, and payments for titles issued by the National Authority for Property Restitution.

Expenditures for projects financed from non-reimbursable external funds (including EU subsidies for agriculture) totaled 5.89 billion RON, a decrease of 35.2% compared to the same period in 2024.

Investment expenditures, which include capital expenditures and those related to development programs financed from internal and external sources, amounted to 13.0 billion RON, a decrease of 23.98% compared to the same period last year, when they totaled 17.1 billion RON.