site.btaRomania Freezes Salaries, Pensions, Raises Taxes as Inflation, Budget Deficit Grow

At the end of 2024, the Romanian Government decided to freeze salaries, pensions, and benefits, while simultaneously raising some taxes, increasing the expenditure burden. The prices of cooking oil and bread are expected to rise by at least 10%, and meat and dairy products will also become more expensive after tax breaks for farmers were removed, reports the Adevarul newspaper.

Romania currently has the highest inflation rate in Europe, and economists expect this situation to continue this year due to the government’s new fiscal measures.

According to Adevarul, the purchasing power of Romanians will be affected by a series of price increases. The removal of tax breaks in agriculture, the rise in the minimum wage, and new excise duties on fuel will lead to price increases of at least 10% for basic food items. Bread and cooking oil may become 10% more expensive, while meat and sausages will rise by 5-8%. Dairy prices are expected to increase by 2-5%.

With a deficit exceeding RON 100 billion, debts of over RON 250 billion, and pressure from the European Commission (EC) to reduce the budget deficit, the Government has started tightening the belt in 2025. Public sector salaries are frozen, and benefits and pensions will not be indexed to inflation.

EUR 1 equals RON 4.97.

At the end of last year, Romania's new Government, once again led by the social democrat Marcel Ciolacu, adopted a decree aimed at reducing the budget deficit to 7% of GDP by 2025 from the 2024 level of 8.58%.

The EC gave Romania a seven-year extension to bring down its budget deficit to 3% of GDP, with the first step being to bring it down to 7% in 2025. 

The Government’s measures include raising taxes, cutting subsidies, limiting public sector wage growth, and freezing pension increases. Several social benefits and extra payments will also be eliminated, and hiring in the public sector will be restricted.

Romania's Ministry of Finance expects these fiscal measures to save over EUR 26 billion by the end of 2025.