Romania’s economy continues to slow down, and the fiscal measures currently being discussed seem to focus mainly on a series of tax increases. These could significantly accelerate the deceleration. A fiscal package whose main elements are a temporary increase in the effective VAT rate by at least 3 percentage points, alongside a reduction in public spending—largely investment-related—would be a viable solution. These are simple measures with immediate impact. This option preserves the fragile growth prospects for this year, bringing the budget deficit to -7.8% of GDP in 2025 (on an ESA basis), a realistic level. Conceptually, any increase in taxes on capital or labor is suboptimal, with a high cost-benefit ratio for the economy at this time. The fiscal package can include contingency clauses so that, depending on the economy’s evolution this year, the fiscal reform can also address these aspects if necessary. Simulations for the 2025–2031 horizon show that the budget deficit can be brought below 3% of GDP by the end of the period in the proposed form.
A fiscal package in which consumption tax increases are combined with simultaneous increases in capital and labor taxes has no economic logic, deepening the economic downturn and unnecessarily jeopardizing the foundations for economic recovery. Romania needs to remain fiscally competitive. In 2026, there is room for a marginal reduction in social security contributions by one percentage point and for capping these contributions at a reasonable number of average national salaries—such as five—for other types of income. At the same time, there is room for eliminating the turnover tax, the pole tax, and additional energy taxes. These measures will generate more budget revenue, driven by the economic growth they stimulate.
It is necessary for the VAT increase to be accompanied by efficient, immediate measures to reduce the VAT gap. The effects of these measures will lead to a marginal decrease in consumption, with a positive impact on the current account deficit. The signal sent by reducing social contributions will encourage employment, increase competitiveness, and partially offset the decline in purchasing power caused by a higher VAT rate. On net, the budget deficit is on a downward path, even under conditions of positive economic growth, slightly below the 2024 level of 0.8%.
Last but not least, the core issue must be addressed—namely, the non-compliance with the fiscal responsibility law adopted in 2010. There is a need to quickly rethink the legislative framework so that derogations from this law are made only exceptionally and within a certain limit, to prevent such slippages in the future.