Romania's public debt is expected to reach 60 percent of gross domestic product (GDP) this year, Finance Minister Alexandru Nazare admitted to CNN's Antena 3 television last night.
The minister said that in the last five years, public debt has increased by 20 percent - from 570 billion lei to over 1.1 trillion lei.
The finance minister said that Brussels has constantly asked Romania to take corrective measures in view of the economic situation, but it has not done so.
“(…) These things have been requested for three years, especially in the last year and a half, but we have not taken corrective measures (…)“, admitted the minister, who has held this post since the end of June this year.
Last year, Romania's budget deficit reached 9.3 percent of GDP from 6.6 percent in 2023. The increase in the deficit contributed to an increase in debt to 54.8 percent of GDP in 2024. of 48.9 percent of GDP in 2023.
The European Commission (EC) forecasts Romania to have a deficit of 8.6 percent of GDP in 2025 if current policies are not changed. The EU expects Romania's GDP growth this year to grow by 1.4 percent.
To correct the budget deficit, the new Romanian government, which took office at the end of June, has pushed through parliament a package of fiscal and budgetary measures to reduce the excessive budget deficit. The measures include an increase in various taxes and fees, including the value-added tax (VAT) from 19 percent to 21 percent from August 1 this year. A reduced rate of 11 percent will be maintained for basic food products, medicines, firewood, books, water supply, sewage and district heating, as well as access to museums and other cultural institutions.
However, the austerity measures were met with public discontent and protests. The trade union confederation “Cartel Alfa“ organized a protest march around parliament today in defense of workers and pensioners.
Finance Minister Alexandru Nazare admitted that the austerity measures will affect living standards and inflation.
“(…) We must say it very clearly, this package, although it stabilizes our economy and protects us from a catastrophic situation in which we lose our investment rating, also has adverse consequences. It will have adverse consequences. I mean, this will be seen in inflation. We need to say it very clearly, directly and honestly, to explain to Romanians that this is a price we are paying to avoid a much higher price, an extremely high one, which would mean a downgrade of Romania's rating. And to which we were extremely close, and the danger has not completely passed," Nazare said, quoted by the news website News.ro.
Asked how close Romania is so far, the finance minister replied: "Very close. (…) We have never been as bad as we are now".
Inflation in Romania accelerated to its highest level in more than a year in June, data from the National Institute of Statistics showed. The consumer price index rose by 5.7 percent year-on-year in June, compared to a 5.5 percent increase in the previous month. This is the highest inflation rate since April 2024, when prices rose by 5.9 percent, according to statistics.