The Council today adopted the recommendation under the excessive deficit procedure for Romania. The recommendation establishes that Romania should put an end to the excessive deficit situation by 2024 at the latest.
The Council found that an extension to the current deadline for Romania to correct its public deficit would be important in order not to compromise the economic recovery after the COVID-19 pandemic. The new deadline for correcting the excessive deficit allows for a more gradual effort and a balance between fiscal consolidation and the economic recovery.
The recommendation indicates that, in order to meet this new deadline, Romania would need to achieve a general government deficit target of 8.0% of GDP in 2021, 6.2% of GDP in 2022, 4.4% of GDP in 2023, and 2.9% of GDP in 2024, which is in line with the Romanian government’s objectives.
The Council has taken into account the changes in the Romanian fiscal situation, budgetary developments in 2020 and the new budgetary strategy put in place and calls for reforms, including in the management of public finances. In this context, the Recovery and Resilience Facility can provide an opportunity for Romania to improve its fiscal situation while still supporting growth and job creation.
Background and next steps
In April 2020, the Council adopted a recommendation to Romania with a view to ending the excessive deficit by 2022. Due to the uncertainty caused by the COVID-19 pandemic, the Commission did not put forward a recommendation for Romania in November 2020.
The 2021 spring forecast does not indicate that Romania will correct its excessive deficit by the deadline of 2022 established in the Council recommendation from April 2020. Economic fallout from the COVID-19 crisis has led to significant deviation from the economic assumptions on which that recommendation was based and it no longer provides a relevant basis for fiscal policy guidance.
The recommendation adopted today takes into consideration the recent developments and sets the new deadline for the correction of Romania’s excessive deficit as 2024. Romania is expected to report to the Council by 15 October 2021 on the consolidation strategy to achieve the targets set in the recommendation.