The adoption of measures to respond to the new energy shock should not derail the course of fiscal consolidation, according to academician Daniel Daianu, President of the Fiscal Council.
'The budget correction programme resulted in the deficit being even lower than the target set at the November 2025 revision: 7.65% of GDP compared with 8.4% of GDP (on a cash basis). This performance was due to the restructuring of the National Recovery and Resilience Plan (PNRR) programme (shifting projects from loans to grants), lower interest expenditure than projected at the second revision in November, reduced spending on personnel and subsidies, as well as an increase in certain budget revenues. The Government is targeting a cash deficit of 6.2% of GDP this year. No new taxes or duties should be needed beyond those already included in the policy packages. The adoption of measures to respond to the new energy shock should not derail fiscal consolidation,' Daniel Daianu stated in the introduction to the 21st edition of the Romania - Euro Area Monitor convergence report, entitled 'A New Energy Shock'.
According to the document, fiscal consolidation is also necessary to keep public debt under control, which stands at around 60% of GDP, up from 39% in 2019. The evolution of public debt has become a major vulnerability for the economy, given the rates at which the Romanian state is borrowing. Without budgetary correction, public debt would head towards 80% of GDP within a few years, Daianu warns.
'It is positive that the Government has decided to continue capping gas tariffs for 2026 and that the cap on commercial mark-ups for basic food products will be extended. State intervention to mitigate the impact of the war in the Middle East should take into account several benchmarks: fiscal consolidation must not be jeopardised; key sectors of the economy (agriculture and transport) must be supported; assistance should be temporary; and what the state gains from rising energy prices should be used to compensate those in need of support. Companies that record exceptional profits from rising energy prices should be subject to additional taxation (a windfall profits tax),' Daianu writes.
According to the Fiscal Council President, the question of what will follow after 2026 is crucial and concerns the capacity to continue reducing the public deficit, namely fiscal consolidation. If the VAT gap and corporate tax gap are substantially reduced, together with other measures (for example, controlling public expenditure in line with nominal GDP dynamics), he argues that the deficit could fall below 4% of GDP within a few years.
In his view, fiscal consolidation is absolutely necessary to improve Romania's sovereign rating. If the deficit were to remain stuck at around 6% of GDP in the coming years, it is unlikely that the current rating assessment would improve. Moreover, it could even deteriorate if public debt is not stabilised. Comparisons with other EU states that have significantly higher public debt should take into account the size of the economy, industrial strength and national wealth, competitiveness, the level of budget revenues, domestic market financing, the external balance, membership of the euro area, and other factors, the same source notes.
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