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The ruling coalition in Romania announced that it agreed over the first elements of the 2024 budget planning, essentially on boosting public spending in areas such as education, healthcare, social security (pensions) and public investments, which it expects to finance out of the supplementary revenues generated by the fiscal package starting January and by the fiscal reform (envisaged under the Resilience facility) as of September.
Experts, however, do not rule out unplanned tax hikes in 2024, despite the multiple elections scheduled, “in case something goes wrong.” The biggest risk remains the application of a plan B for supplementing budget revenues, increasing the VAT to 21%-22%, which is the biggest risk for the economy, according to Alex Milcev, EY Romania partner, quoted by Economica.net.
Finance minister Marcel Bolos said that no fiscal tightening will be necessary next year other than the budgetary reform to be tackled under the Resilience agreement with the European Union, which will generate a significant impact, particularly starting in 2025. There will be no further tax hikes other than the fiscal package set for enforcement in January, he assured, according to Cursdeguvernare.ro.
But the public spending is set to increase significantly next year. The budget of the public education system will see the most impressive advance in 2024, +57% y/y, among others, in order to finance the higher wages promised during the summer. For the public healthcare system, the government counts on significant funds from the Resilience Facility and under the regular EU budget.
The public pension system will need more money as well, as all pensions will increase by +13% starting January (to cover inflation), and they will surge by another 40% on average as of September following the implementation of the new Pension Law.
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