At the very end of last year, the Romanian government decided to freeze salaries, pensions and allowances and at the same time increased some taxes, increasing the burden of spending. The price of oil and bread is expected to jump by at least 10 percent, and there will also be an increase in the price of meat and dairy products, after tax breaks for farmers were removed, summarizes the newspaper “Adeverul“, writes BTA.
Currently, Romania is the country with the highest inflation in Europe, and economists expect this situation to persist this year with the government's new fiscal measures.
The purchasing power of Romanians will be hit by the series of price increases that are coming. The elimination of tax breaks in agriculture, the increase in the minimum wage and new excise taxes on fuel will lead to a price increase of at least 10 percent for basic food products, says "Adeverul". Bread and oil could rise in price by 10 percent, and meat and sausages by between 5 and 8 percent. Dairy products are expected to see a price increase of between 2 and 5 percent.
With a deficit of over 100 billion lei, loans of over 250 billion lei and pressure from the European Commission to reduce the budget deficit, the government has been tightening its belts since the beginning of the year. The salaries of public sector employees have been frozen, and allowances and pensions will not be indexed to the inflation rate, writes "Adeverul". One euro is exchanged for 4.97 Romanian lei.
The chairman of the employers' organization in the bakery sector “Rompan“ Aurel Popescu said that employers will have to include the new measures in their costs, because if they make workers pay for them, they will leave. “God forbid that we have an increase in raw materials“, commented Popescu and recalled that from April 1 the price of energy will also be liberalized. “We will certainly have big problems for Easter“, he predicted.
Radu Timis – executive director of a sausage factory, said that the elimination of tax breaks in agriculture leads to an increase in costs, which cannot be compensated without blocking investments. “Between blocking investments and a small increase in prices, we prefer to continue with investments and preserve jobs“, said Radu Timis, quoted by “Adeverul“.
At the end of last year, Romania's new government, once again headed by the Social Democrat Marcel Ciolacu, adopted a regulation that aims to reduce the country's budget deficit to 7 percent of gross domestic product by 2025.
The European Commission has given Romania a seven-year grace period to reduce the budget deficit to three percent of gross domestic product, with the first step being to reduce it to 7 percent this year.
According to an assessment by the Fiscal Council, an independent institution analyzing the government's budget and fiscal policy, the budget deficit at the end of 2024 will reach 8.58 percent.
The government's measures include tax increases and restrictions on a number of subsidies, as well as on the growth of public sector wages and pensions. A number of social benefits and additional payments are being eliminated, and public sector hiring is being curbed.
The Romanian Ministry of Finance expects the fiscal measures to save the state over 26 billion euros by the end of 2025.