Katja Schmidt
Gilles Thirion
OECD Economic Surveys: Romania 2026
Abstract
Romania’s economy has demonstrated resilience through multiple crises, but growth has slowed recently due to weaker external conditions and the dampening effect of fiscal consolidation on domestic demand. Inflation remains elevated and well above the tolerance band of the inflation target, further driven since mid-2025 by the removal of electricity price caps and significant increases in taxes and excise duties in the context of fiscal consolidation. Monetary policy should maintain current interest rates until inflation shows a clear downward trend toward the target. While financial stability appears broadly sound, stricter regulation should be put in place for vulnerable segments, such as corporate foreign currency lending and government-backed credit schemes. Fiscal policy has initiated an overdue and ambitious consolidation plan, which must be fully implemented and pursued beyond 2026 to stabilise the public debt ratio. Improving the efficiency of public spending will be necessary, but revenues should also be strengthened, particularly by addressing the large VAT gap.
1.1.1. Romania’s economy slowed amid weaker external demand and high domestic policy uncertainty
Romania has experienced one of the fastest GDP growth rates in comparison with OECD Members over the past two decades, resulting in strong income convergence in GDP per capita (PPP), from 43% of the OECD average in 2004 to 71% in 2024. Productivity gains, supported by significant investment and efficiency improvements, have led to a significant catch-up in productivity levels (see Chapter 4). Romania’s economy has also weathered well successive economic shocks during recent years, such as the pandemic, Russia’s war of aggression against Ukraine, and the subsequent energy crisis.
However, GDP growth has declined recently from 2.3% in 2023 to 0.9% in 2024 and an estimated 0.7% in 2025 (Figure 1.1, Panel A&B). Private consumption, traditionally Romania’s main growth driver, has started to weaken in the course of 2025 (Figure 1.1, Panel B), reflecting lower real income growth due to decelerating wage growth, freezes of public sector wages and pensions in 2025, and additional price pressures following the removal of caps on electricity prices in July, as well as increases in VAT and excise duties in August.
Note: In panel A, OECD CEEC is a non-weighted average and covers Czechia, Hungary, Poland, Slovak Republic and Slovenia.
Source: OECD Economic Outlook database.
Investment has accelerated in 2025, supported by strong public investment and inflows of EU funding. This follows weaker performance in 2024, when subdued external prospects constrained private investment amid elevated policy and economic uncertainty, multiple elections, and global trade tensions. Export performance has been subdued in recent years due to weak external demand from Romania’s main trading partners. The direct impact of higher US tariffs is limited due to low direct US trade exposure (about 2.5% of total goods exports), but Romania is indirectly affected through its integration into European supply chains, particularly as a supplier of intermediate inputs (see Chapter 4).
1.1.2. Domestic factors contribute to higher inflation
As a catching-up country, inflation has been relatively high in Romania compared to more advanced economies over the last two decades. After the strong price variations related to the pandemic and the energy crisis – inflation peaked at 14.6% in November 2022 before broadly stabilising around 5-5.5% between mid-2024 and mid-2025 – inflationary pressures have intensified again recently. Headline inflation stood at 8.5% in January 2026 (Figure 1.2, Panel A), well above the tolerance band of the inflation target (2.5% ±1 percentage point). More recently, these factors were compounded by the phase-out of price controls on electricity introduced during the energy crisis (July 2025) and increases in consumption taxes (August 2025). While temporarily contributing to higher inflation, the removal of electricity price controls is a welcome step.
The persistence of high inflation following the stabilisation of energy prices reflects the impact of strong domestic cost pressures, as rapidly rising unit labour costs have fuelled core inflation (non-food and non-energy goods and services) over the past few years (Figure 1.2, Panel A). External factors, particularly higher commodity food prices have also contributed, though to a lesser extent. Rapid wage increases also raised pressures on cost-competitiveness, although unit labour cost growth has slowed markedly since the second half of 2024 (Figure 1.2, Panel B).
Note: Headline inflation is measured by Eurostat’s harmonised consumer price index (HICP).
Source: OECD calculations based on Eurostat data and National Institute of Statistics data.
Real wages have continuously risen at faster rates than labour productivity over the past years (Figure 1.4, Panel B). While hourly labour costs remain the second lowest in the region, they also grew much faster than in most regional peers in 2024 (Figure 1.4, Panel A). Public-sector wages rose by 18.5% in 2024, and the statutory minimum wage increased by more than 30% between 2023 and 2024. Over time, sustained gaps between productivity and real wage growth undermine cost-competitiveness, notably in the labour-intensive tradable sub-sectors (see Chapter 4). Romania adopted, as recommended in the previous Survey and in line with the EU Minimum Wage Directive, a reform aimed at making minimum wage increases more predictable and based on objective criteria by linking them to productivity gains and inflation (OECD, 2024[1]).
1.1.3. Romania has a persistent current account deficit
Romania has maintained a persistent trade deficit over the last decades, which has gradually widened since the mid-2010s, reaching -6.0% of GDP in 2024 (Figure 1.3, Panel A). This deterioration mainly reflects the goods trade balance, while the surplus in services has remained broadly stable. While catching-up economies usually run a trade deficit, this has also reflected a gradual erosion in cost competitiveness, weighing on goods exports. At the same time, strong domestic demand – driven by probably unsustainable wage growth (rapid income growth was not matched by corresponding productivity gains) and expansionary fiscal policy – has contributed to the deterioration of the trade balance. In Romania, the fiscal and current account balances tend to move closely in tandem (“twin deficit”) (Figure 1.3, Panel B).
Note: Panel A: Balance of payment (BoP) basis.
Source: OECD Economic Outlook database.
1.1.4. The labour market is softening alongside structural challenges
Boosting Romania’s workforce is a key priority since a large share of the population remains detached from the formal labour market while, at the same time, the workforce is projected to decline significantly in the next decades (see Chapter 2). Despite having increased, the employment rate remains below the OECD average, reflecting large regional disparities and low levels of employment for certain groups, such as young people, the low-skilled, women, and Roma people. If immigration of low-skilled workers has recently helped offset workforce losses (net international migration turned positive in 2022-2023), emigration remains high, often involving better-educated workers than those entering (National Bank of Romania, 2025[2]).
More recently, the effects of the economic slowdown on the labour market became visible in the second half of 2024, with a gradual rise in unemployment, slower wage growth (Figure 1.2, Panel B), and weaker employment prospects. The slowdown of wages reflects the freezing of public sector wages and the absence of new minimum wage adjustments following increases in July 2024 and January 2025. As of July 2026, the minimum wage is set to increase again, by 6.8%. Additionally, the government capped extra-wage benefits and bonuses for civil servants as part of its fiscal consolidation efforts. The elimination as of January 2025 of sectoral tax exemptions in agriculture, food processing, construction and IT further contributed to slowing net wage growth.
Low employment rates also reflect Romania’s still large informal economy. The share of undeclared work is well above the OECD average and above other OECD CEE countries (Franic, Horodnic and Williams, 2023[3]; OECD, 2022[4]). As with low formal employment rates, informality is concentrated in rural areas, where subsistence farming and family work remain common. A substantial portion of employment also occurs in unregistered firms, without formal labour contracts, or is only partially declared. This often involves “envelope wages”, where earnings above the minimum wage are paid off the books and not officially reported (Robayo, Balaban and Wronski, 2024[5]). Informal jobs are often associated with low pay, poor working conditions, and limited access to career development and training opportunities (OECD, 2022[4]). Workers in undeclared employment are largely excluded from social protection systems, including health insurance and pensions, which contributes to poor health outcomes and increases the risk of old-age poverty.
Source: Eurostat; National Institute of Statistics; OECD Economic Outlook database; and OECD calculations.
1.1.5. Growth is set to remain moderate amid fiscal consolidation
GDP growth is projected to remain below potential in the near term, constrained by fiscal consolidation, with growth of 1% in 2026 (Table 1.1). Public investment, supported by EU-funded projects, will help sustain activity while private consumption will remain weak until mid-2026 due to decelerated wage growth, higher unemployment, and tighter fiscal policy. Planned freezes of public wages and pensions until end-2026, together with the temporary impact of higher VAT and excises, will constrain real incomes. Demand from trading partners is set to recover gradually as activity in the EU strengthens. GDP growth is expected to pick up afterwards, reaching 2.2% in 2027, supported by rising consumption (owing to wage growth) while private investment is also expected to strengthen as financing conditions improve. Headline inflation is projected to remain elevated until mid-2026, returning within the NBR’s tolerance band (2.5% ± 1 percentage point) by the first quarter of 2027, reflecting negative base effects.
Romania’s outlook is subject to significant downside risks (Table 1.2). Delays in the absorption of EU funds would dampen investment, constrain short- and medium-term growth, while increasing reliance on domestic sources of funding. Fiscal consolidation could weigh stronger on growth than currently expected. Political uncertainty and delays in implementing additional fiscal consolidation measures beyond 2026 could weaken fiscal discipline, negatively affecting sovereign borrowing capacity and public debt sustainability. Subdued growth among EU trading partners, intensification of global trade and geopolitical tensions could slow the recovery in export-oriented industries and reduce foreign capital inflows. Risks to inflation remain, including renewed rising energy and food prices. Sharp and prolonged drought could significantly reduce crop yields in Romania and across the region, disrupting domestic agricultural output and tightening food supply. This would lead to substantial food price increases, disproportionately affecting rural areas that depend on local agricultural production and vulnerable households that spend a large share of their income on food. On the upside, continued commitment to medium term fiscal adjustment, along with strong absorption of EU funds and the implementation of structural reforms under the Recovery and Resilience Plan (RRP) could strengthen investor confidence and support growth prospects. Increased EU defence spending, including through the European Defence Fund could boost activity further.
1. Contributions to changes in real GDP, actual amount in the first column.
2. Including statistical discrepancy.
Source: OECD Economic Outlook database and OECD calculations.
1.2.1. Fiscal policy complicates the conduct of monetary policy
The National Bank of Romania (NBR) has maintained its key policy rate at 6.50% since August 2024 (Figure 1.5, Panel A), striking a cautious balance between persistently high inflation and an economic slowdown. Headline and core inflation remain well above the tolerance band of 2.5% ±1 percentage point, also due to the temporary effects of the removal of the electricity price cap and higher VAT and excise duties. These fiscal measures are expected to contribute approximately 4.0 percentage points to headline and 1.4 percentage points to core inflation between mid-2025 and mid-2026 (National Bank of Romania, 2025[2]). Rate cuts should be deferred until underlying inflation, net of one-off effects related to fiscal measures, shows a clear downward trend toward the inflation target.
Monetary policy has faced challenges in achieving disinflation over recent years due to the expansionary fiscal stance. In 2023 and 2024, strongly expansionary fiscal policy – particularly substantial public sector wage and pension increases – exerted significant upward pressure on domestic inflation. These measures amplified external inflationary shocks and triggered second-round effects. As a result, the accommodative fiscal stance partially offset the restrictive monetary policy pursued by the NBR. Fiscal policy is now pursuing a more restrictive stance, which is expected to support disinflation, although temporary upside price effects persist due to tax and excise increases. Looking ahead, achieving a more balanced macroeconomic policy mix will be essential to safeguard price stability and support more sustainable growth.
In addition to its monetary policy responsibilities, the NBR is also tasked with formulating and implementing Romania’s exchange rate policy, which is characterised officially by a “managed float” (European Commission, 2024[6]). The NBR intervenes in the foreign exchange (FX) market to maintain the national currency (leu/RON) within a relatively narrow band against the euro. Although the NBR does not disclose information regarding the scale or rationale of its FX interventions, it is widely understood that exchange rate stability plays a significant role in the Bank’s monetary policy strategy. While the RON/EUR exchange rate has remained relatively stable between early 2021 and mid-2025, a depreciation has been observed since then, with the leu crossing the threshold of 5 lei per euro for the first time in May 2025 (Figure 1.5, Panel B). The depreciation coincided with heightened political uncertainty following Romania’s presidential elections in May 2025.
Note: In Panel B, the average monthly exchange rate (RON/EUR and RON/USD) is calculated as a simple arithmetic mean of daily exchange rates on the forex market.
Source: OECD Economic Outlook database; and National Bank of Romania.
Romania’s FX reserves held by the NBR remain near record highs, reaching EUR 65 billion in December 2025, well above the 2009-2024 average of EUR 35 billion. This shows the NBR’s strong buffer position and its capacity to manage exchange rate pressures and intervene in the FX market when needed. However, FX interventions come with associated costs (Adler and Mano, 2021[7]). The NBR also handles all foreign exchange inflows on behalf of the Ministry of Finance in the context of EU funds. Limited statistical data on the composition of FX flows makes it challenging to disentangle the various drivers behind changes in reserves (IMF, 2023[8]). To strengthen the economy’s overall shock-absorption capacity and reduce costs associated with FX operations, Romania should consider allowing for some greater flexibility of the leu against the euro within its managed float regime, focusing interventions on episodes of excessive volatility.
Romania’s monetary policy transmission operates through the standard channels – interest rate, credit, asset prices, exchange rate, and expectations – but its overall effectiveness remains somewhat constrained by structural characteristics of the financial system. Low levels of financial intermediation (see Chapter 4), combined with significant euroisation, limit the pass-through of domestic interest rates to credit and deposit making. Limited data and information on long-term inflation expectations may undermine the effectiveness of the expectations channel in monetary policy transmission. Addressing these structural issues would strengthen the overall transmission channels of monetary policy.
Romania is legally required to adopt the euro once all convergence criteria are met (Article 140 TFEU), and successive Romanian governments have reiterated support for euro accession. However, elevated inflation and fiscal deficits reduce the likelihood of entering ERM II – a prerequisite for euro adoption – over the next couple of years, which could allow for greater exchange rate flexibility to increase the shock absorption capacity of the economy and a reduction of euro borrowing to reduce financial stability risks.
1.2.2. Private sector borrowing has picked up, but levels of indebtedness remain low
Lending rates to the private sector have eased from their peaks, with euro-denominated loan rates declining more rapidly than those of leu-denominated loans, reflecting divergent monetary policy trajectories since mid-2024. Rates for leu-denominated corporate loans have even edged upward again since mid-2024 (Figure 1.6., Panel A). Private credit growth has gained some momentum following the slowdown in 2022-2023, with robust year-on-year growth rates of 8% for household loans and more subdued growth of 4% for loans to non-financial corporations (NFCs) as of December 2025. Within the household segment, consumer credit is particularly dynamic (11%). However, private sector indebtedness remains low by OECD and EU standards – around 40% of GDP overall, and 23% of GDP for bank lending – reflecting high homeownership and low mortgage lending for households and limited reliance on debt financing for corporates (Figure 1.7; see also Chapter 4).
Source: National Bank of Romania.
FX-borrowing (predominantly in euro) remains widespread in Romania, accounting for close to 50% of outstanding corporate loans and around 7% of household loans in December 2025 (Figure 1.6, Panel B). However, new household borrowing in euros is limited, accounting for less than 1% of total new loans. As in other countries in the region, corporate FX borrowing has increased after the pandemic, driven by widening interest rate differentials with the euro area. Still, it has remained well below the post-GFC peak of 62% and has broadly plateaued since 2023 and the last Survey (OECD, 2024[1]). While export-oriented Romanian enterprises typically conduct their business in euro, thereby mitigating debt-servicing risks in the event of local currency depreciation, domestically focused firms operating in leu face higher FX risk exposure. According to data published for 2023, net exporting firms received one-third of FX credit in 2023, while nearly half of the new FX loans went to net importers (National Bank of Romania, 2024[9]). This vulnerability is compounded by the limited use of currency hedging instruments, particularly by smaller firms. While financial stability risks for banks are partially mitigated by the high share of FX corporate deposits, which reduces loan-to-deposit mismatches in banks’ FX exposure, FX exposure risks for individual lenders persist.
Regulators and banks in Romania regularly monitor and highlight the risks associated with FX borrowing (National Bank of Romania, 2025[10]). Close monitoring should be maintained. Borrower-based macroprudential measures, including loan-to-value (LTV) and debt-service-to-income ceilings (DSTI) for household loans, are also more stringent for FX-denominated loans than for those in local currency. These measures have been effective in reducing household FX borrowing, which has fallen significantly (Figure 1.6, Panel B). Tight regulation should continue to be applied to household FX borrowing. To further mitigate risks in the corporate sector, regulators should strengthen measures on corporate FX loans such as enhanced supervisory guidance to banks (e.g. mandatory hedging if loans are not naturally hedged against currency risks), more detailed communication on FX exposures (e.g. publishing the shares of hedged vs. unhedged FX loans by bank and NFC business activity), and incentives to promote the development and use of accessible FX hedging instruments. For instance, in Poland, banks have introduced streamlined FX forward contracts and automated hedging platforms tailored to SMEs, making these tools more accessible for smaller firms.
Non-consolidated private sector gross debt (securities other than shares, loans) for non-financial corporations and households, 2024
Note: OECD CEEC is the non-weighted average of Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: Eurostat.
The ratio of non-performing loan (NPL) remains low by historical standards and near the EU average (2.2% for EU countries participating in the Single Supervisory Mechanism). However, credit quality has slightly deteriorated over the last year, with the overall NPL ratio rising modestly to 2.9% at the end of Q3 2025, compared to 2.5% a year earlier, with a higher NPL ratio for corporates. Credit risks are more pronounced for certain categories of corporate loans, particularly those extended to SMEs in domestic currency. While this does not pose an immediate risk for banks, it warrants continued monitoring in case the situation deteriorates further. Since the pandemic, government-backed loan guarantee schemes have been significantly expanded (with IMM Invest, Romania’s emergency government-backed loan programme during the Covid19-crisis, later expanded and rebranded as IMM Plus). Currently, about 18% of the outstanding loan stock to corporates is supported by government-backed guarantees (National Bank of Romania, 2025[11]). These portfolios also exhibit lower credit quality: their NPL ratio reached 9.0% in September 2025, and they account for about 21% of all non-performing loans (National Bank of Romania, 2025[10]). The Romanian government should continue phasing-out broad-based public loan guarantee schemes. Any government backed support programme should be narrowly targeted (for example, on young and highly innovative firms, to correct market failures) and based on transparent eligibility criteria and rigorous financial standards. The National Committee for Macroprudential Oversight (NCMO) issued recommendations on this matter in October 2025, which should be fully implemented (NCMO, 2025[12]).
1.2.3. The financial sector appears sound, but pockets of vulnerabilities exist
The Romanian banking system appears sound. Capital buffers and liquidity ratios are high and significantly exceed regulatory requirements (Figure 1.8), and asset quality (NPL coverage by provisions, NPL ratio) is good. Bank profitability has slightly declined since its mid-2023 peak but remains high by historical standards, standing at 1.7% for returns on assets (ROA) at the end of Q3 2025. However, the system continues to be shallow relative to the size of the Romanian economy, with banking sector assets amounting to just 50% of GDP – the lowest ratio among EU countries. Nonetheless, banking remains the predominant segment of Romania’s financial sector, accounting for around 74% of total financial assets. Foreign-owned institutions continue to play a major role, holding around two-thirds of total banking assets and representing four of the top five largest banks by asset size.
Note: OECD, OECD CEEC and EU are non-weighted averages. OECD CEEC covers Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: IMF Financial Soundness Indicators database.
Macroprudential regulation in Romania is well-established and benefits from longstanding expertise, contributing to overall financial stability (Eller et al., 2021[13]). Capital-based macroprudential measures in Romania’s banking sector include a countercyclical capital buffer (CCyB), maintained at 1% since October 2023; a capital buffer for other systemically important institutions (O-SII), applied at the consolidated bank level and currently ranging from 1% to 2.5%; a systemic risk buffer (SyRB), ranging from 0% to 2% according to the banks’ portfolio quality; and a capital conservation buffer (CCoB), set at 2.5% in line with European regulatory requirements (NCMO, 2024[14]). Borrower-based measures such as LTV and DSTI caps are applied, with distinctions made between leu and FX loans (see above).
A vulnerability of the Romanian banking system lies in its relatively strong sovereign-bank nexus, reflected in banks’ substantial exposure to government loans and holdings of government securities. Direct exposure through government lending and sovereign securities holdings amount to 27% of total banking sector assets at the end of Q1 2025, with sovereign securities representing the majority (22%), which is high in international comparison (National Bank of Romania, 2025[11]). The risks are not evenly distributed across the sector, with domestically owned banks generally exhibiting higher exposure. However, the lack of readily available data on individual banks’ sovereign exposures makes institution-level analysis challenging. While such exposures may support short-term bank profitability, they heighten the sector’s vulnerability to sovereign risk (National Bank of Romania, 2025[11]). Some policies proposed to reduce banks’ sovereign bond holdings – such as applying positive risk weights or introducing exposure limits – could help address concentration risks but may entail some important risks in the shorter term (e.g. financial volatility) (see for a recent discussion Estrada et al. (2025[15])), which would require careful consideration before implementing such measures. Under current EU regulation, sovereign exposures to EU Member States continue to receive a zero-risk weight. This highlights the critical importance of pursuing fiscal consolidation to limit borrowing needs.
In 2023, the Romanian government introduced an extraordinary tax on the banking sector, effective from 2024, applying a 2% levy on the turnover of credit institutions operating in Romania. This rate was increased to 4% as of July 2025, in line with the new fiscal consolidation package (institutions with a market share below 0.2% continue to benefit from a reduced rate of 2%). This levy is expected to remain in force until the end of 2026. The government justified the tax as part of its broader fiscal consolidation strategy, targeting sectors with high profitability, such as banking.
Although several EU countries, such as Czechia, Spain, and Italy, have introduced extraordinary bank levies in recent years, Romania’s approach stands out due to its reliance on turnover rather than profitability. This design disproportionately penalises high-volume (transaction) institutions and may discourage lending activity, which is undesirable in a country where financial intermediation is low. As highlighted in the last Survey, the banking levy and its discretionary adjustments cannot be a substitute for a corporate tax reform, which should remain a policy priority (see below). The bank levy should be phased out by end-2026 as planned. In any case, the design of such a tax should be based on profitability rather than turnover.
Romania is facing major fiscal challenges. Despite having been under the EU’s Excessive Deficit Procedure (EDP) since 2020, government budget deficits have remained persistently high, significantly exceeding the 3% Maastricht deficit criterion (Figure 1.3, Panel B). In 2024, the public deficit rose to 9.3% of GDP from 6.7% in 2023. This reflected large increases in public sector wages, higher pension spending following the September 2024 recalculation of pension rights and domestically financed capital spending. After some fiscal consolidation measures adopted in January 2025 by the previous government, the new government strengthened consolidation for 2025-2026 during summer 2025 (see Box 1.2 for further details).
Despite the recent consolidation efforts, the public debt ratio is currently on an unsustainable trajectory, as shown in the debt sustainability analysis (Figure 1.10). The public debt ratio remains relatively low by OECD standards, but it has risen rapidly in recent years, from 45% of GDP before the pandemic to 63% by the end of 2024 (Figure 1.9, Panel B). Rapid increases in the debt stock combined with deteriorating financing conditions prompted a surge in interest payments, which almost doubled from 2020 to 2024. Planned fiscal consolidation measures for 2025-2026 are positive steps but remain insufficient to stabilise public debt over the medium and long term.
Note: OECD CEEC is the non-weighted average of Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: OECD Economic Outlook database.
General government gross debt, Maastricht definition
Note: In the current path scenario, made under a no-policy change assumption, the structural primary balance deficit remains constant at the projected 2027 level, adding the projected changes in ageing costs derived from the EU AWG 2024. In the prudent path under fiscal rules, the course of fiscal policy assumes additional gradual consolidation of the structural primary balance compared to the current path, equivalent to 4.25% of GDP between 2027 and 2031, in line with Romania’s fiscal commitment under its national medium-term fiscal plan to reach a surplus of 1.7% by 2031. In the fiscal and structural reforms scenario, a set of structural and fiscal reforms is implemented improving the budget situation directly (through fiscal consolidation measures) and indirectly (through the positive impact of structural reforms on public finances and potential GDP growth) compared to the current path. GDP, inflation and implicit interest rates are simulated by the OECD long-term model.
Source: OECD calculations based on OECD Economic Outlook database and OECD Economic Outlook long-term database; (European Commission, 2024[16]).
Substantial EU funds are contingent on compliance with EU fiscal rules and RRP implementation. Losing access to these funds would either negatively impact the debt trajectory or lower public investment that is much needed to stabilise the economy in the context of fiscal consolidation. Specifically, Romania risks a partial suspension of EU funds under the 2021-2027 framework if it fails to take effective action on its budget deficit under the EDP, while delays in implementing RRP reforms and investment could lead to the loss of significant grants under the EU’s Recovery and Resilience Facility (RRF). Between 2020 and 2024, spending financed by non-refundable EU grants has accounted for about 2.2% of GDP annually on average.
Owing to strong fiscal consolidation measures taken in 2025, risks of a downgrade by rating agencies have receded. However, if fiscal imbalances are not adequately addressed beyond 2026, rating agencies may downgrade sovereign debt, which could significantly raise borrowing costs and reduce access to international capital markets. Between late 2024 and March 2025, all three major rating agencies revised their outlook on Romania’s sovereign rating to negative. To finance an increasing debt stock, the government has become increasingly dependent on external investors. In 2024, limited absorption of EU funds constrained access to concessional financing. This increased Romania’s exposure to shifts in international market sentiment. At the same time, the bank-sovereign nexus, already high, has deepened further (European Commission, 2025[17]), which heightens interdependence between public finances and the financial sector (see above). Government financing conditions have started to improve during the fourth quarter of 2025, after a deterioration that started in 2024 (Figure 1.11).
10-year government bond yields
Source: OECD Economic Outlook database.
Romania faces the difficult task of correcting large fiscal imbalances at a time of slowing economic growth and increasing spending pressures. The impact of a declining workforce, rising pension and health costs linked to demographic ageing (see Chapter 2), together with pressing investment needs in healthcare, education, infrastructure, defence, innovation and climate adaptation (see Chapters 3 and 4), compound fiscal policy trade-offs. According to the EU Ageing Working Group projections, which are included in the debt analysis, ageing-related costs are set to rise by about 2.8% of GDP between 2024 and its peak in 2053 – a cost still significant, although considerably reduced by the 2024 pension reforms. Moreover, interest payments are also set to increasingly weigh on fiscal space until the budget deficit is significantly reduced.
A credible and well-designed fiscal strategy is needed to ensure the long-term sustainability of public finances. To put debt on a sustainable path, Romania will need to specify additional measures to sustain budgetary consolidation beyond 2026. The prudent path under fiscal rules reflects Romania’s commitment under the national multi-annual fiscal plan in the context of EU fiscal surveillance, which targets a surplus of the primary structural balance of 1.7% of GDP by 2031. This implies an additional structural budgetary adjustment of approximatively 4.25% of GDP relative to the current path, based on the OECD forecasts for 2027. Such an adjustment would reduce somewhat the public-debt-to GDP ratio over the medium- to long-run, which would reach about 55% (in Maastricht terms) by 2060.
The fiscal and structural reform scenario outlines a strategy that pairs fiscal consolidation – about 3.1% of GDP (see Table 1.3) – with the structural reforms proposed in this Survey (see Box 1.1), aimed at boosting employment and productivity, and improving social and environmental perspectives. By supporting stronger growth, these reforms would help restore the sustainability of public finances, allowing the debt ratio to fall to around 55% (in Maastricht terms) by 2060 (Figure 1.10), necessitating a milder fiscal consolidation than the prudent path scenario.
The sequencing of the fiscal measures presented in Table 1.3 is consistent with a gradual fiscal consolidation of the government budget balance. This implies that any new deficit-increasing measures identified across the Survey should be phased in only as fiscal space becomes available through the implementation of deficit decreasing measures. Given the scale of recent fiscal packages, the economic and fiscal impacts of these measures should be closely monitored and regularly assessed to avoid an inappropriate policy stance if economic and fiscal conditions turn out different than expected. Finally, generating the fiscal space needed to finance new measures will crucially depend on sustained progress in tax collection capacity, by strengthening VAT compliance and reducing informality over the medium run (see further discussion below). As such efforts will take some time to translate into higher revenues, accelerating progress in that domain is essential.
Table 1.3 presents estimates of the fiscal impact of selected structural reforms in this Survey over the medium-term. The estimates are indicative and do not allow for behavioural responses. Moreover, revenue gains from the recommended reform package via higher employment are not included.
Fiscal savings (+) and costs (-)
Note: The measures shown here represent nationally financed programmes, while EU-funded initiatives are expected to continue serving as the principal source of additional investment in priority areas such as transport and digital infrastructure. Regulatory measures (e.g. removing administrative burdens to run a business) are treated as fiscally neutral and are not shown.
Source: OECD calculations.
Table 1.4 quantifies the potential GDP impact of selected structural reforms. Simulations are realised with the OECD long-term model. While other reform proposals in this survey have GDP implications, not all can be quantified due to model limitations.
Source: Long-run scenarios using OECD Long-Term Model and OECD calculations.
A package of reforms effective as of January 2025, which amounted to about 2% of GDP, including:
Freezing of public wages and pensions in 2025.
The removal as of January 2025 of PIT exemptions and reduced SSC obligations in the construction, agriculture, food industry and computer software sectors.
Reduction of the turnover threshold for the micro-enterprise tax regime from EUR 500 000 to EUR 250 000 as of 2025, and to EUR 100 000 in 2026.
Increase in dividend tax from 8% to 10%.
Fiscal measures adopted in July 2025, with fiscal savings estimated at 0.6% of GDP in 2025, and 2.85% of GDP in 2026. The full-year effect of these measures amounts to 3.45% of GDP according to government estimates, which appear plausible.
Expansion of the freeze on public sector wages and pensions until 2026, capped bonuses and allowances in public administration, investment cuts, cost cutting measures in education.
January 2026: Increase in the dividend tax from 10% to 16%.
From August 2025: increase of the standard VAT rate from 19% to 21%, and introduction of a single reduced rate of 11%, replacing the former 9% rate and 5% rate. Some exemptions were lifted.
In August 2025 and January 2026: excise duties on petrol, diesel, alcohol, beer, and sugar-sweetened non-alcoholic beverages rose (will rise) in two stages, by 10% each time.
From 1 September 2025 until end 2027: introduction of a (temporary) 10% health contribution to pension income above 3 000 lei per month. Groups previously exempt from health contributions (CASS) such as co-insured spouses are now required to contribute to maintain health coverage.
A doubled special tax on bank sector gross revenues, from 2% to 4% in 2025.
The following measures were adopted in September 2025 in Parliament and are estimated to save 0.3% of GDP in 2026, including:
Increase in property taxation and increase in capital gains taxation.
Increase of the social security contribution ceiling for the self-employed.
Improvements in the governance of state-owned enterprise.
Introduction of a logistical tax on small value extra-EU parcels.
In December 2025, the government adopted new revenue measures applicable in 2026, estimated to have a marginal revenue decreasing impact (around -0.07% of GDP):
Halving the minimum turnover-based tax from 1% to 0.5% in 2026, with elimination from 2027.
Temporary extension of the non-taxable allowance for minimum-wage earners (RON 300 until end-June and RON 200 for July–December 2026).
Introduction of a single 1% turnover tax for micro-enterprises, applicable up to a EUR 100 000 revenue ceiling.
Extension until end-2027 of the monopoly tax in the electricity and natural gas sector and of the tax on revenues from natural resource exploitation.
Maintaining the turnover tax for oil and gas operators until end-2026.
In February 2026, the government adopted additional fiscal measures:
Aiming at reducing public-sector payroll costs by 10%.
Amending the property tax reforms to reduce the scale of the tax increase for vulnerable taxpayers.
The following sections outline options to create the fiscal space needed to restore fiscal sustainability. They first examine ways to enhance the efficiency of current and capital public spending in a context of rising spending pressures. The following sections then delve into options to raise government revenues in a prudent way, through more efficient tax administration and reforms that increase tax revenue while minimising distortions and enhance fairness. Finally, the last section considers improvement to the fiscal framework that could enhance medium-term budget management.
Romania has experienced large increases in public spending in recent years, with total government spending rising by around 10% of GDP between 2017 and 2024 (Figure 1.12, Panel B). In 2024, government expenditure reached 43.6% of GDP (Figure 1.13, Panel C), after rising by about 2.5% of GDP compared to 2023 (Figure 1.12, Panel A), driven by ad-hoc rises in public wages and pensions and nationally financed public investment.
1. Public investment, nationally financed, corresponds to general government gross fixed capital formation minus the revenue of capital transfers from the institutions and bodies of the EU.
Source: Eurostat; and OECD calculations.
Given Romania’s constrained fiscal space and the mounting pressures from demographic ageing, Romania should aim for stronger efficiency gains in public spending to pursue consolidation. Romania faces rising pressures to fund healthcare, education, social assistance, infrastructure, and innovation – critical pillars for sustaining economic growth and ensuring a basic social safety net. Romania spends still relatively low amounts in these categories in comparison with OECD countries (Figure 1.13, Panel A). Given the need for continued fiscal consolidation, addressing these spending pressures – alongside financing the other deficit-increasing measures outlined in the Survey (Box 1.1) – will require a gradual and prudent approach. At the same time, more effective prioritisation and improved resource efficiency would contribute to creating necessary space for productive expenditure while improving the quality of public spending. Moreover, stronger control mechanisms are needed to mitigate the risks of large spending increases and to strengthen the management and predictability of public expenditure.
Note: Panel A: OECD is a non-weighted average excluding Canada, Chile, Mexico, New Zealand and Türkiye. Panel C: OECD CEEC is the non-weighted average of Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: OECD National Accounts database; OECD Economic Outlook database; DREES (2025).
1.4.1. Strengthening spending efficiency
Keeping the public wage bill under control
Public wages account for a comparatively large share of total government spending in Romania, 25.7% of government spending in 2024 versus the OECD average of 20.6%, underscoring some potential for reducing the public wage bill. There is evidence that the public sector is also paying a wage premium compared to the private sector, even after controlling for worker characteristics (World Bank, 2021[18]). Moreover, at present, salaries, bonuses, and allowances often differ among equivalent positions in different ministries, creating inconsistencies and weak performance links. As such, structural reform of Romania’s wage-setting system is necessary both for fiscal sustainability and to improve the quality of public service delivery.
There is a need for a more cautious, predictable, and transparent management of the public payroll (OECD, 2025[19]). Pay increases are largely determined by discretionary decisions that de facto undermined the unitary nature of the pay system and they have at times resulted in large unpredicted spending increases; most recently in 2024, when public wage raises granted in response to protests and upcoming elections led the wage bill to jump by nearly 1% of GDP. While some of the increases were justified (such as ensuring more competitive wages for teachers), large ad-hoc increases complicate budget management, contribute to comparatively high share of public wages in the government’s total spending, and also influence private sector’s wages. As such, this can fuel inflation, potentially affecting a country’s cost competitiveness and external position (OECD, 2024[1]).
Since 2025, the government has adopted a freezing of public-sector wages which has been extended through 2026, as foreseen under the provisions of the Fiscal Responsibility Law (see below). While freezes alone are insufficient to deliver long-term fiscal stability (IMF, 2016[20]), they should in this case be considered a first step towards a permanent moderation of the public wage bill. In February 2026, the government adopted an Emergency Ordinance aimed at reducing public-sector payroll costs by 10%. This is particularly important as Romania’s RRP envisages a comprehensive reform of public sector human resource management, including a fully unitary pay system, revised coefficients to reflect job complexity, new salary scales, and capped bonuses.
While necessary to improve public pay fairness and to promote a more competitive public administration, such reform typically implies an upward adjustment of the wage bill since specific categories of salaries would be revised upwards while pay cannot decrease (World Bank, 2024[21]). Such additional short-term fiscal costs would not be appropriate at the current juncture. To minimise near-term fiscal costs, the introduction of the new public pay system should be delayed until sufficient fiscal space is available, and it could then be phased-in progressively, targeting in priority the jobs that are most underpaid. In the medium-run, the reformed pay system should ensure a gradual decline of the wage bill as a share of GDP relative to 2024 levels, to support fiscal consolidation. This could be achieved through a predictable, formula-based mechanism that temporarily links wage increases to growth below that of consumer inflation and/or productivity growth. The indexation rule could be reconsidered over time, taking fiscal sustainability into account. In addition, Romania could consider removing automatic links between certain public pay adjustments, such as bonuses and allowances, and increases in the minimum wage.
Integrating programme-based budgeting and spending reviews in budgetary processes
There is scope to improve the efficiency of public spending and ensure that resources are better aligned with policy objectives and outcomes. As noted by the Committee of Senior Budget Officials in the context of its accession review, there is potential to strengthen Romania’s performance-based approach to spending management, including in public administration where it contributes to inefficient resource allocation. Currently, the budget is not voted on a programme basis. Although reforms have been introduced, implementation remains inconsistent, weakening the link between resources and results. Under the RRP, the government plans to gradually roll out programme-based budgeting, piloted in three ministries in 2024 and extended to the central administration from 2025 (World Bank, 2024[21]). Romania already has a solid legal foundation for strengthening budget planning and policy coherence.
In addition, the systematic integration of spending reviews into budgetary processes can improve spending quality, support fiscal consolidation, and reallocate resources to priority areas. International evidence shows they are most effective when they are: closely linked to the annual and multi-annual budget cycle; underpinned by strong political commitment; followed by clear implementation and monitoring; and published to ensure transparency (Doherty and Sayegh, 2022[22]). Romania has made progress in establishing the legal basis for a systematic use of spending reviews, including through the adoption of the Spending Review Strategy 2024-2030 (Ministry of Finance, 2023[23]) in June 2023 and amendments enacted to Romania's Public Finance Law (Hoogeland, Dimitriadis and Mandl, 2024[24]). They clarify governance arrangements and expand the Fiscal Council’s mandate to assess their impact, though limited resources will make this challenging (see below) (OECD, 2022[25]). The Ministry of Finance developed methodologies for monitoring impacts and identifying multi-annual priorities. The government’s medium-term plan commits to mandatory annual reviews and savings targets.
Effective implementation remains challenging, though. Delivering on the ambitious objectives of the Spending Review Strategy 2024-2030 would mark significant progress. A precondition for expanding the rolling-out of spending reviews is to strengthen administrative capacity through training and guidance for staff in the Ministry of Finance and other public institutions. Better coordination across institutions – particularly around access to data and decision-making – would enhance effectiveness, as will a stronger connection between the review process and budget preparation. This requires aligning timetables and ensuring findings of reviews feed directly into budget discussions. Continued progress in these areas, if backed by consistent political commitment, would help deliver lasting improvement in spending quality.
In the future, spending reviews should involve actionable and transparent recommendations on fiscal targets either to generate savings or to identify fiscal space as a way to enable re-prioritisation. Recently, the government has carried out reviews of the health and education sectors. While this is a welcome step, fiscal targets were not sufficiently clearly defined, particularly for the review of the education sector (World Bank, 2024[21]). Moreover, clearer evidence of follow-through, for instance in terms of concrete budgetary outcomes, would help build credibility by making achievements more tangible.
Better managing government purchases
There is also room to generate additional savings by tackling inefficiencies in government purchases via improved public procurement. This could enhance the effectiveness of government capital spending (see Chapter 4) and reduce intermediate consumption, which currently stands at 15.1% of total spending (compared to the OECD average of 14.4%). The government public procurement system, which is highly decentralised and distributed across multiple institutions, would benefit from more effective coordination between stakeholders (OECD, 2025[26]). Efforts should aim at expanding centralised public procurement to more goods and services, focusing in priority on high spending sectors. Implementing the related reforms foreseen in the RRP and in Romania’s medium-term fiscal plan is necessary.
Improving the quality of public investment management and speeding up the absorption of EU funds
Public investment is central to Romania’s long-term growth and living standards, particularly given its catching-up needs. Public investment spending increased to 5.9% of GDP in 2024, from 3.4% of GDP in 2019, supported, in part, by increasing receipts of EU funds. While preserving a robust level of public investment is crucial to avoid compromising future growth, prioritisation will be key given the restricted fiscal space (Yang et al., 2023[27]). Higher absorption of EU funds and implementation of the RRP should play a key role in sustaining robust public investment levels. The pace of increase in domestically financed capital spending seen in 2024 has been a large contributor to the budget deficit deterioration in 2024. Moreover, during the same year the government revised upward its capital investment target by about 11% compared to the initial budget. Enhanced project prioritisation and inter ministerial cooperation is warranted on the planning of public investment to avoid further increases domestically financed capital spending in the current context.
Persistent challenges affect public investment management across the entire cycle (World Bank, 2023[28]). The low quality of project preparation, weak prioritisation, delays in procurement, and political interference have been reported in past Surveys as contributing to long investment cycles (OECD, 2022[4]). A stronger budgeting system is necessary, including closely tracking projects advancement and short- and medium-term spending commitments. Public investment decisions lack coherence and long-term strategic planning, as responsibilities are fragmented across line ministries (see Chapter 4). Planning is typically siloed by funding source (EU vs domestic). This prevents the government from effectively tackling complex multi-sectoral challenges (World Bank, 2021[29]). While the regulatory framework for public investment is comprehensive on paper, it remains highly complex and presents important execution difficulties in practice. Positive steps have recently been taken, including the introduction of improved tools for capital budgeting, and stronger appraisal and prioritisation of major projects (World Bank, 2021[29]).
Romania needs a coherent medium-term investment management framework anchored in long-term strategies, such as the government’s Romania 2030, in a way that enhances coherence and spurs synergies across EU funded and nationally financed investment priorities. Such a framework should integrate and harmonise procedures across all financing sources (including SOEs and PPPs), and embed performance evaluation into project selection to improve project prioritisation. At present, the Ministry of Finance plays only a limited oversight role, and its weak coordination capacity reduces the visibility of central government over public investment plans and undermines its ability to anticipate near- and medium-term financing needs (European Commission, 2025[30]). Stronger oversight by the Ministry of Finance of project planning and implementation across ministries is essential. Multi-annual budgeting should also become a central requirement for all projects, in view of creating a more predictable environment for investment.
Romania should accelerate efforts to make full use of the large potential from EU funding. The low revenue from EU grants in 2024 reflects subdued progress on the RRP implementation and a large decline in absorption of other EU funds compared to 2023. Risks of losing part of the EUR 12.1 billion from RRF grants (plus EUR 1.4 billion from REPowerEU) would compound the situation. As such, swift implementation of the remaining RRP reforms and investment and faster absorption of other EU funds would provide major macroeconomic stabilisation in 2026, while also supporting fiscal balancing by financing a larger amount from EU funds. Slower absorption involves risks of major funding shortfalls, project cancellations, while greater reliance on the national budget would complicate consolidation.
Accelerating the absorption of EU funds under the programming period 2021-2027 is essential to sustain EU funding after the termination of the RRF at the end-2026. Romania has access to over EUR 90 billion for 2021-2027, including EUR 31 billion of EU grants from cohesion policy. These funds can be used until end-2029, with the eligibility period extended to end-2030 under certain conditions. Weak local administrative capacity is a key bottleneck to EU funds absorption. Local authorities are central to securing and implementing EU-funded projects (except for the RRF) but often face weak financial resources, insufficient qualified staff, and a lack of technical expertise. More than two-thirds of rural municipalities have no staff trained in drafting project proposals (Marin, 2020[31]). The authorities should scale up targeted capacity-building programs for rural and disadvantaged municipalities in view of maximising the absorption of EU funds.
1.4.2. Demographic change and new spending needs require fiscal space
Spending priorities in education, health, and social assistance
Socio-economic disparities remain wide across Romania. Major cities such as Bucharest are growing at a rapid pace, with low unemployment and per capita incomes above the OECD average. In contrast, many other regions face lower living standards and limited economic opportunities. Although poverty has declined, it remains particularly acute in rural areas and among Roma communities, where inadequate housing, weak infrastructure, and poor access to health and social services persist. A large share of working-age Romanians remains outside the formal labour market.
As discussed in other chapters of this Survey, expanding access to quality education and training is essential to support labour market participation, reduce poverty (see Chapter 2), and boost productivity (see Chapter 4), especially in disadvantaged areas. The 2023 Education Law rightly aims to raise education spending, which is comparatively low in Romania (Figure 1.14, Panel B). Limited access to quality education and high drop-out rates in upper secondary school, especially in rural areas, leave many young people without basic competencies, contributing to high NEET rates and persistent poverty. In 2023, half of adults with low educational attainment were at risk of poverty, compared with just 1.3% among the tertiary-educated. Adult training opportunities are also scarce, with ALMP spending at just 0.1% of GDP in 2023. This restricts opportunities for reskilling and job matching. At the same time, strengthening the efficiency of public spending in these areas is essential to ensure that investments in education and social sectors translate into better outcomes.
Note: OECD CEEC is the non-weighted average of Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: OECD National Accounts database; and OECD Education at a Glance database.
Stronger investment and more efficient organisation of the health system are essential to improve access and health outcomes (see Chapter 2). In 2023, Romania’s public spending on healthcare account for only 4.7% of GDP – well below the CEEC average of 6.6% (Figure 1.14, Panel A). Private health spending accounts for 1.4% of GDP, below the average in the OECD. A strategy combining increases in excise taxes on tobacco and alcohol, along with tighter regulations and stronger health literary education would help reduce unhealthy lifestyles. Efficiency gains could also be achieved by strengthening preventive and primary care as this would help contain higher health costs arising when diseases are addressed at a later stage. Integrating relevant findings from the 2024 spending review could help raise efficiency. Yet, these measures cannot replace the need for additional resources in the longer run, notably to strengthen access in rural areas through community care centres. Expanding access to quality healthcare would also help improve living conditions and encourage young families to build their future in Romania (OECD, 2024[1]). Long-term care provision is underdeveloped, too. Home-based services are scarce, especially in rural and remote areas, and only a small share of older people live in care institutions (European Commission, 2025[30]). With the old-age dependency ratio set to increase sharply, the lack of formal care risks leaving needs unmet while placing a heavy burden on families. This also constrains female labour market participation, as women provide most unpaid care.
Romania faces pressures to increase social assistance and unemployment spending. Social protection expenditure remains low at 12.9% of GDP in 2024, below the OECD average of 15.7%, and concentrated on pensions (9% of GDP), while support for the working-age population is limited (Figure 1.13, Panel A&B). It focuses on family benefits, which are relatively high due to generous parental leaves – while childcare and early childhood education remains underdeveloped – undermining both child development and female labour force participation. They could become more efficient if rebalanced from supporting long parental leaves toward a larger focus on childcare support (see Chapter 2). Unemployment benefits provide limited income insurance. Replacement rates are among the lowest in the OECD (Figure 1.15, Panel B), which might hurt adequate job search and increase mismatching (OECD, 2025[32]). Coverage is minimal, with only 7.9% of unemployed people receiving benefits in 2023 compared with 36.3% in the EU (European Commission, 2025[30]). Raising replacement rates and easing eligibility would improve income security and allow more effective job search. Despite recent reform in 2024, adequacy of the minimum-income scheme remained low in 2025 (Figure 1.15, Panel A). Further increases are needed to bring minimum-income support closer to the poverty threshold.
Note: EU and OECD CEEC are non-weighted averages. OECD CEEC covers Czechia, Hungary, Poland, Slovak Republic, and Slovenia. In panel A, data refers to single person without children and includes housing benefits. In panel B, Net replacement rates give the share of previous net income replaced by unemployment benefits and top-ups for a single person with previous earnings at the average wage in the second and seventh month of registered unemployment. Calculations are for a 40-year-old single person without children who has been continuously employed since the age of 18 in full-time employment. Previous earnings are at the median of the national full-time earnings distribution.
Source: OECD Adequacy of minimum income benefits dataset; and OECD Net replacement rates in unemployment dataset.
The recent pension reform created near term pressures, but marks a critical step forward for long term sustainability
The pension reform implemented in September 2024 strengthens long-term fiscal sustainability by encouraging longer working lives. The reform is in line with the recommendation from the previous Survey, although the recalculation of pension rights led to a one-time increase in pension costs. In particular, the reform considerably strengthened the links between benefits and contributions. The statutory retirement age for women will increase to 65 by 2035, bringing it in line with that of men and supporting higher labour force participation among older women, which is currently among the lowest in the EU (see Chapter 2).
From 2035, the retirement age will be linked to life expectancy. Based on current projections, this would raise the retirement age to 67 for an individual entering the labour market in 2022 at age 22 (OECD, 2025[32]). This should help correct the fact that the average age of the first old-age pension receipt remains low in Romania, at 59.5 years as of 2023 compared to 61.3 years on average in the EU (see also Chapter 2). With rising life expectancy, additional measures to encourage longer careers remains a priority, including through flexible work arrangements, lifelong education, workplace adaptations, and better healthcare.
Regarding the pension level, new indexation rules make increases more predictable and reduce reliance on ad-hoc adjustments. New rules index pensions annually to inflation plus half of real wage growth, within upper and lower bounds. This is an important step to safeguard pension sustainability. The formula implies a gradual fall in replacement rates from the public scheme. The development of the mandatory defined contribution (DC) second pillar, introduced in 2008, is therefore an essential part of Romania’s strategy to enhance long-term pension adequacy and sustainability. OECD modelling suggests that once mature, the DC scheme could raise replacement by 20 percentage points for a median worker entering the labour market in 2022 (OECD, 2025[32]). Recent reforms strengthened the retirement-income function of the DC scheme. A draft law adopted in August 2025 caps lump-sum withdrawals at 30%. Sectoral exemptions (IT, construction, agriculture, food) were also abolished in January 2025, broadening coverage and strengthening sustainability.
Overall, the reform improved pension adequacy, particularly for lower earners (OECD, 2025[32]). The 2024 reform raised pensions for low earners proportionally more than for average earners. The projected net replacement rates combining the public and private mandatory pillars are above the OECD average, at 77% for average earners (OECD average of 61%) and 95% for low earners for a worker (OECD average of 73%) entering the labour market in 2022 at age 22 and retiring at the earliest possible age without penalty (OECD, 2025[32]). The reform thus helps tackle old-age poverty, which is high (16% in 2021), though equal to the total population poverty rate. If the pension freezes were to be extended beyond 2026, targeted and temporary compensatory measures could be envisaged to offset the impact of pension freezes on vulnerable retirees. At aggregate level, the freezes foreseen in 2025 and 2026 will nearly offset the average increase in pension benefits of about 20% following the recalculation of pensions in 2024.
Special occupational pensions were reformed in 2024, aligning them more closely with the contributory principle and introducing minimum contribution periods. This limits fiscal costs and helps correct unjustified preferences. After the Constitutional Court struck down the reform of magistrates’ non-contributory benefits in December 2024, the government proposed in 2025 a revised reform gradually raising the retirement age to 65 over 15 years and capping benefits at 70% of final net salary; this law was upheld by the Constitutional Court in February 2026 and promulgated by the President.
Further tax reforms are needed to improve the efficiency and fairness of the tax system, as well as raising more tax revenue. Prior to the introduction of the new revenue raising measures (Box 1.2) in July and September 2025, tax revenues (including social contributions) stood at 27.9% of GDP, below the OECD average of 34.1% and the CEEC average of 35.8% in 2024 (Figure 1.16, Panel A&B). The new measures reduce several distortionary and fiscally costly tax exemptions and special regimes identified in previous Surveys, while also raising additional revenue resources – including through increased VAT – that are much needed in the current budgetary situation (see above).
However, more can be done to address remaining inefficiencies while also raising taxes that are relatively less distortive. Weak tax compliance and widespread informality continue to narrow the tax base, leaving Romania with the highest VAT compliance gap in the EU (29.5% in 2024) and widespread un- or underdeclared income. The relatively high tax wedge on low-income earners discourages formal employment, and the flat income tax and uniform social contributions do little to reduce income inequality. Revenue from PIT and SSC combined are comparatively low (Figure 1.16, Panel B), which also partly reflects low capital income taxation. Moreover, recurrent property taxes – among the least harmful to growth – remain underused, while environmental taxes are weakened by extensive fuel exemptions and relatively low fossil fuel taxation. This section identifies priority reforms to the taxation of income, capital, consumption.
Note: The OECD, EU and OECD CEEC aggregates are non-weighted averages. OECD CEEC includes Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: OECD Global Revenue Statistics database; and Eurostat.
1.5.1. Making the taxation system more efficient and fairer
Efforts to remove exemptions and harmonise tax treatment across income sources should continue
Romania took key steps to remove distortive tax exemptions that previously restricted its personal income tax and social security bases. In January 2025, Romania eliminated sector-specific exemptions in IT, construction, agriculture, and food, covering an estimated 20% of total employment (World Bank, 2023[33]). All sector-level exemptions have now been removed, in line with recommendations from the previous Survey. The introduction of a 10% health insurance contribution (CASS) in August 2025 on pension income above 3000 lei per month is another positive, albeit temporary step in removing unjustified tax exemptions. This will increase the progressivity of the tax and contribution system while also supporting revenue. Romania should make this measure – currently planned until end 2027 – a permanent change of its tax system and envisage to continue efforts towards aligning the taxation and health contribution on pension incomes with that of wages. Gross pension income is subject to a 10% income tax, but unlike labour income, which is taxed on the full amount (excluding the social contribution base), the tax on pensions applies only to the portion exceeding a non-taxable threshold of RON 3 000 per month.
Effective tax rates remain much lower for the self-employed, especially at higher incomes due to discrepancies in social contributions between employees and the self-employed. SSC treatment should be harmonised across employment types as differences create inequities, scope for tax arbitrage, while reducing government revenue. Employees pay full SSCs on their actual earnings, whereas self-employed workers face a ceiling that limits their liability. While the ceiling has been increased in September 2025, it should be removed or raised significantly more, at least for health contributions. This favours self-employment in high-skilled sectors, such as the liberal professions and consultancy. In Romania bogus self-employment as a share of total employment is among the highest among the EU (European Labour Authority, 2023[34]).
Capital income taxation remains relatively low
The previous Survey noted that effective tax rates on capital are comparatively low in Romania relative to wages, pointing to opportunities to raise additional revenue while also improving the fairness of the system and investment neutrality. Relatively low capital income taxes contribute to Romania’s low revenue from personal income taxes (Figure 1.16, Panel B) and limit the redistributive capacity of the tax system because capital income is predominantly earned by higher income groups. For high-income earners, a high tax (and contribution) wedge on wages can encourage to incorporate to reduce their tax bill. Thus, in reforming the personal income tax system, attention will be needed to calibrate effective labour income tax rates on top earners across capital and labour income sources (OECD, 2024[1]).
The increase in the dividend tax from 10% to 16% on January 2026 is a welcome step, which increases the progressivity of the overall income tax system. There is also room to increase taxation on rental income by reducing the reduction in the standard allowed deduction of 40%, which narrows the tax base. To improve the neutrality in the taxation of different forms of capital income, Romania could consider bringing up the tax rates of other investment incomes towards 16%, as most of them are taxed at 10% (e.g. capital gains, rents, interests, royalties). Capital gains tax on residential property should be introduced, while primary residences could remain exempted. This could be done in a forward looking basis, by applying it only to properties purchased after the reform, such that it would avoid a revaluation of all properties (World Bank, 2023[33]).
Removing distortions around the taxation of corporate income and micro enterprises
Romania’s statutory CIT rate of 16% is among the lowest in the OECD but broadly in line with other CEE countries. Romania collects among the lowest CIT revenues in the OECD in percentage of GDP. Informality is high while numerous corporate tax concessions further narrow the base. These concessions should be reassessed regularly to ensure cost-effectiveness and possibly rationalised.
Romania has considerably reduced the scope of its microenterprise regime, which allowed many firms to opt for a 1% or 3% (depending on qualifying condition) turnover tax instead of the 16% CIT. As of January 2026, Romania introduced a single 1% rate. The previous eligibility threshold – EUR 1 million until 2022 – was excessively high, covering around 96% of firms in 2020, and encouraging firms to stay small, split into multiple entities, and under-declare turnover. The threshold will fall to EUR 250 000 in 2025 and EUR 100 000 in 2026, near but still above the VAT registration limit (about EUR 78 000 end 2025). This reduces arbitrage opportunities while broadening the CIT tax base. Yet, some room for arbitrage between the VAT and microenterprise regimes still exist and could be removed by harmonising the two thresholds. As a next step, the authorities should exclude highly profitable sectors whose owners can comply with the general tax regime, such as consultancy and liberal professions, since they benefit disproportionately from the system due to high margins.
Stronger tax administration and compliance is essential (see below) to support revenue collection as many firms transition to the regular CIT system. Without effective enforcement, benefits may be offset by lower compliance and possibly increase informality. The revised microenterprise regime should be closely monitored to detect unintended effects and to ensure a smooth transition to the standard CIT system. Supporting capacity building would help firms moving to the standard tax regime to deal with new administrative constraints. Shifting more businesses to the regular CIT system could potentially even help reduce informality, as the turnover tax previously discouraged the formalisation of business purchases since the taxpayer was not allowed to deduct actual costs from its profit base (Mas-Montserrat et al., 2023[35]).
Recent turnover taxes on large businesses should be phased out. In 2024, Romania introduced a minimum turnover-based tax for firms with annual income above EUR 50 million, set at 1% of turnover, if higher than their CIT liability. As of January 2026, this turnover-based tax was decreased to 0.5%, and the government plans to eliminate the tax by 2027. Additional sectoral levies were also imposed. Credit institutions must pay a 4% turnover tax (see above), and oil and gas firms a 0.5% levy, both on top of the standard 16% CIT. The turnover tax for oil and gas firms and credit institutions was extended until end-2026. While turnover taxes are easy to administer and can support government revenue, sectoral levies are arbitrary, and risk distorting investment and innovation, particularly for low-margin and input-intensive firms.
There is scope for raising more property taxes, particularly on immovable property
There is scope to increase revenue from property taxation, which is comparatively low in Romania (Figure 1.17), particularly for the recurrent immovable property taxation, which is one of the least detrimental tax to economic growth (Arnold et al., 2011[36]). Weak links between property taxes and actual housing values, combined with low tax rates limit both revenue potential and tax equity. Property tax revenue was only 0.6% of GDP in 2024 – less than half the OECD average. Raising further revenue from such tax would strengthen fiscal capacity of local governments, while also reducing pressures on the central government (OECD, 2023[37]).
Romania should move ahead with plans to shift toward a market value base for all recurrent property taxes. A reform, initially proposed to take effect in 2023 was postponed until 2026. In Romania, the taxable value of dwellings and land remains still largely based on area. As of 2026, the government has nearly tripled the value of the property tax base, which is expected to contribute to higher fiscal revenues. Completing the transition to market-value property taxation requires a robust mass valuation model supported by comprehensive cadastral and notarial data and associated administrative systems. A World Bank project is underway to develop such a digital platform for local authorities to calculate market values automatically based on real transaction data. Once in place, valuations should be regularly updated (World Bank, 2023[33]).
Property taxes, 2024 or latest available
Note: The OECD, EU and OECD CEEC aggregates are non-weighted averages. OECD CEEC includes Czechia, Hungary, Poland, Slovak Republic, and Slovenia.
Source: OECD Global Revenue Statistics database; and Eurostat.
Revising the property tax rate structure and eliminating concessions could further enhance revenues. The central government sets tax rate bands – currently between 0.08% and 0.20% for residential property – from which local governments chose their rates. These bands could be increased progressively to help Romania reach levels of revenues similar to the OECD average. Moreover, tax concessions and exemptions should be limited and better targeted, focusing on vulnerable taxpayers, public buildings, or narrow group of specific public-benefit organisations. All concessions and exemptions should be, at minima, frequently reassessed based on cost-benefit analysis (Wen, Rakhimova and Norregaard, 2025[38]).
Market valuation should be phased in gradually to ease the transition and protecting low-income households (OECD, 2024[1]). Given the high share of homeowners, including many low-income earners and a large stock of poorly maintained rural housing, discrepancies between property values and owner’s incomes may necessitate targeted support measures. This could take the form of a tax relief for low-income households up to a certain threshold or a tax deferral until the property is sold. To facilitate the transition, in its 2013 reform Ireland adopted a tax deferral until the property is sold, which also helped build political support by allowing households to postpone payments (OECD, 2023[37]).
Greater emphasis could be placed on environmental taxation
Environmental tax revenue accounted for 1.6% of GDP as of 2023, about 0.3 percentage points above the OECD average. Yet, energy tax rates remain too low to effectively curb energy use and support a transition to clean energy sources (see chapter 3), and their increases are largely driven by higher consumption and a growing car fleet. Excise duties and implicit carbon prices are low, uneven across fuels, and weakened by subsidies (OECD, 2024[1]), while preferential treatment of diesel compared to petrol is environmentally unjustified. Despite recent increases, excises on diesel – and to a lesser extent petrol – remain relatively low, while natural gas and coal, responsible for over half of fuel-combustion emissions, are taxed very lightly.
Gradual, well-communicated price rises, combined with targeted support for vulnerable households, would help align incentives with Romania’s 2030 climate targets. Aligning fossil fuel prices with their full external costs could generate large revenues, up to 1.3% of GDP by 2030 (World Bank, 2023[33]). Since then, Romania took tax measures in that direction (see below), meaning that the remaining revenue potential from raising such tax is now lower (Box 1.1). While revenues would fall over time with decarbonisation, they could play an important role in financing early transition costs, supporting investment in low-emission technologies, and cushioning the impact of higher energy prices on vulnerable groups. Excise duties on diesel and petrol were raised by 6% in January 2025 and by 10% in August 2025. The authorities should consider a faster increase than currently planned under the multi-year path of fuel excise increases legislated through 2027, and extend efforts beyond 2027.
Romania is expanding environmental taxation beyond energy, for instance by raising waste-related taxes in several municipalities. Full implementation of the planned heavy truck toll (TollRo), planned for July 2026, would be another important step in that direction. Current vehicle charges provide weak incentives for cleaner fleets. Developing additional road user charges for passenger vehicles, ideally by preparing for kilometre-based road-use charging, would be a natural next step (see Chapter 4). Moreover, recycling rates are poor, and producer responsibility schemes underdeveloped (OECD, 2024[1]). Raising low landfill taxes would generate revenues that can be re-channelled to finance municipal waste infrastructure.
Romania should also set out a clear strategy to phase out fossil-fuel subsidies, which weaken carbon price signals, encourage inefficient energy use and impose significant fiscal costs. These include tax incentives and direct transfers for coal, natural gas and district heating, often through state-owned enterprises (World Bank, 2023[33]). Reduced VAT rates of 11% (previously 5%) also apply to district heating and firewood instead of the standard 21% (previously 19%). Moreover, additional fuel tax reductions apply in agriculture, fisheries and forestry, notably through diesel excise duty refund schemes. The government lacks comprehensive data on the size of these supports, but conservative estimates put them at least at 0.4% of GDP before recent changes (OECD, 2024[39]). Romania should also withdraw retail gas price caps, which have been in place following the energy crisis. The electricity price cap for households was lifted in July 2025. If energy prices rise again, targeted and temporary income support – such as lump-sum transfers decoupled from consumption – would better protect vulnerable households while preserving price signals.
There remains room to remove regressive reduced VAT rates
There is still scope to strengthen VAT revenues by broadening the application of the standard rate. In August 2025, Romania raised the standard VAT rate from 19% to 21%, removed several exemptions, and merged its two reduced rates of 5% and 9% into a single rate of 11%. Prior to the reform, the actionable VAT policy gap – capturing foregone revenue due to reduced rates – was estimated at 24.7% in 2023 (European Commission, 2025[40]), broadly in line with regional peers. Further broadening of the standard rate could raise additional revenue while limiting economic distortions. As inflation slows, the standard rate could be applied to more goods and services by removing reduced rates that do not fulfil a clear policy objective. In particular, applying the standard rate to items primarily consumed by higher income households, such as restaurant meals and catering, hotel accommodation, and culture, are good candidates to increase revenue, as these reduced rates are known to be particularly regressive in Romania (World Bank, 2023[33]) and should be lifted.
Personal income taxation lacks progressivity and results in a high tax wedge on low-income earners
The structure of PIT and social security contributions (SSC) results in low redistribution and imposes a relatively high tax wedge on low-income earners (Figure 1.18). There is room to improve both the distributive role of taxation, notably through progressive tax rates on higher income and to enhance work incentives, particularly for low-income earners (see also discussion in Chapter 2). Romania applies a flat 10% personal income tax (PIT), among the lowest rates in the OECD. The main economic argument for a flat tax is its simplicity, which can help strengthen tax collection through higher tax compliance and lower evasion as it is simpler to administer by the tax authorities and easier to understand for taxpayers. A work insurance contribution of 2.25 percent on gross labour income is paid by employers. In contrast, employee SSCs are high at 25% for pensions and 10% for health insurance (with SSCs deductible against the PIT base). This results in a combined effective tax and contribution rate of 41.5% for a wage earner not eligible for the basic low-income or dependent allowances. PIT start being applied on the first amounts of labour income, though some modest deductions exist, creating limited progressivity. When the basic PIT allowance for low-income earners is applied, the tax wedge modestly declines to 38.3% for a single worker earning 67% of the average gross wage. Yet, these phase out at relatively low incomes, after which the average contribution and tax rate becomes flat.
Tax wedge for an individual with no children earning 67 % of the average wage, 2024
Note: The tax wedge is the difference between the employer's labour costs and the employee's net take-home pay.
Source: OECD Taxing wages database; and Eurostat.
1.5.2. Strengthening revenue mobilisation capacity
Modernising tax administration would strengthen enforcement and improve compliance
Strengthening tax compliance and enforcement is critical for an effective fiscal management and to create additional fiscal space. Moreover, without improvements on that front, tax increases alone may not raise sustainable revenues, given risks of base erosion. Romania’s low tax revenue reflects in part the scale of its informal economy, which accounted for 27.1% of gross value added according to recent estimates, the highest in the EU (Franic, Horodnic and Williams, 2023[3]). The VAT compliance gap at 29.5% in 2024 (Figure 1.19) has seen little improvement since 2018, when it stood at 32.8%, and remains EU’s largest. This contrasts with significant improvements achieved in most other Central and Eastern European countries over the past decade. Hungary, for instance, nearly closed its VAT compliance gap (from 22% of GDP in 2012) in just a decade.
Value added tax compliance gap, % of estimated total VAT liability
Note: The VAT compliance gap measures the difference between the VAT revenue that would be collected if there were full compliance and actual VAT receipts. The VAT gap covers revenues lost due to fraud and evasion but also insolvencies, administrative errors and legal tax optimisation.
Source: European Commission (2025), Directorate-General for Taxation and Customs Union, VAT gap in the EU- 2025 report.
One avenue that Romania could explore to reduce further the VAT compliance gap is to reduce the use of cash in the economy and accelerate the shift to digital payments. Reliance on cash remains widespread, particularly in rural areas. In a survey conducted in 2021, 62% of adults reported paying utility bills in cash only, far above regional peers (World Bank, 2023[28]). Since 2018 Romania has modernised rules for fiscal electronic cash registers, and it strengthened in 2024 their integration into the systems of the National Agency for Fiscal Administration (ANAF). Restrictions on cash use were tightened by lowering ceilings on cash payments between legal entities, capping firm’s cash holdings (November 2023), and mandating companies and self-employed to accept one non-cash payment instrument (June 2024). More could still be done, notably by further reducing cash ceilings and mandating the electronic payment of tax liabilities. In September 2025, Romania announced requirements for all companies to maintain at least one domestic bank account. A next step could be to require bank-based payment of salaries. Additionally, sustained progress will also require tackling low financial inclusion through improved financial literacy and better rural payments infrastructure (World Bank, 2023[28]).
The RRP supports the introduction of major digital instruments to strengthen tax administration, drawing on the successful experience in other Central and Eastern European (OECD, 2022[4]). By raising the collection efficiency of its three main sources of tax revenue (VAT, CIT and PIT), Romania could raise the tax-to-GDP ratio by 2.5 percentage points according to a conservative estimate (World Bank, 2024[21]). While the long-term benefits of stronger compliance and enforcement can be significant if reforms are successfully implemented, these revenues have not yet materialised and the near-term impact of recent advances is inherently uncertain, particularly in a context of recent tax increases. Thus, the authorities should refrain from integrating ambitious, short-term revenue gains from such reforms in their budgetary plans.
Recent measures are expanding digital reporting and integrating data across sources. By providing ANAF with near-real-time data to target inspections, detect irregularities and reduce compliance costs (e.g. through pre-filled tax returns), these digital tools have significant potential to increase revenue if fully integrated and efficiently utilised. (OECD, 2021[41]). Major measures include a mandatory RO e-invoice system for all B2B since January 2025 and B2C transactions since July 2024, the RO e-Transport system (January 2024) monitoring the transport of goods (focusing on high fiscal-risks items and international freight). The SAF-T (Standard Audit File for Tax) has required standardised electronic reporting from large and medium taxpayers since 2023 and was expanded to small taxpayers. The launch of the e-TVA system on 1 August 2024 consolidates data to automatically generate a pre-filled VAT statement for registered businesses, which can then be reconciled with their VAT returns. Extending such efforts to personal and corporate income tax registration could further lower compliance costs and encourage formalisation.
Strengthening risk-based audits is essential, but success depends on building administrative capacity. Key RRP measures being implemented aim to help identify high-risk taxpayers and transactions for desk checks and on-the-spot audits (European Commission, 2025[30]) using a fully operational electronic risk register, an analytics platform, and an early-warning tool for VAT fraud based on e-TVA data. Effective implementation requires integrating multiple data sources, building advanced analytics capacity, and ensuring sufficient resources and expertise. Poland’s experience highlights the importance of investing in technical expertise and collaboration with private IT specialists (Polish Economic Institute, 2019[42]).
Undeclared work in the private sector as % of total gross value added, 2019
Note: EU is a non-weighted average.
A more holistic approach is needed to reduce undeclared work
A coordinated national strategy is essential to tackle undeclared work effectively. The share of undeclared work accounts for a comparatively high share of GDP (Figure 1.20). Romania lacks a high-level coordinating body or national strategy to tackle this issue (European Labour Authority, 2023[34]). Establishing an integrated national approach – for instance such as Croatia’s inter-ministerial committee on undeclared work – could improve coherence across ministries, tax authorities, labour inspectorates, and social security institutions. Regular joint inspections and systematic information sharing between ANAF, the Labour Inspectorate, and other agencies would make enforcement more effective than isolated actions, which remain the norm today (OECD, 2025[32]).
Romania’s institutional framework for setting fiscal objectives is well developed in terms of legislation, and generally aligned with the OECD’s best practices in budgetary governance (OECD, 2022[25]). It includes a Fiscal Responsibility Law with comprehensive fiscal rules and an independent Fiscal Council. As of 2025, fiscal sustainability rules under the Fiscal Responsibility Law have required the automatic capping of public wages and pensions as long as the public debt-to-GDP ratio remains above 50% of GDP. In a currently high inflation environment, the application of this rule is set to generate large fiscal savings (see Box 1.2).
In practice, commitment to fiscal targets is weak. Repeated derogations have undermined the credibility of the fiscal framework and rendered the rules largely inoperable (European Commission, 2023[43]). Key provisions of the Fiscal Responsibility Law are frequently ignored. Emergency ordinances have often been used to mandate fiscal measures outside the parameters of the fiscal rules. Parliament has also passed ad-hoc spending laws in contravention of constitutional requirements to identify offsetting funding sources, often without the legally mandated impact assessments (OECD, 2022[25]). In several instances, this has obliged the Ministry of Finance to delay implementation or challenge legislation before the Constitutional Court, contributing to an uncertain fiscal environment. Restoring credibility will require consistent enforcement of the national institutional fiscal framework. This could be supported by a stronger role for the Fiscal Council in independently monitoring compliance and assessing the fiscal impact of new legislation. To support more effective implementation of fiscal frameworks, other OECD countries have given their fiscal councils a formal role in monitoring budgetary outcomes and compliance with fiscal rules, including the activation of derogations and escape clauses. For example, the Irish Fiscal Advisory Council is required to confirm the government’s compliance with the domestic implementation of the EU fiscal rules (Rawdanowicz et al., 2021[44]).
There is scope to improve the use and accuracy of forward year baselines and to anchor these into the fiscal strategy to mitigate the danger of overestimating available fiscal space for multi-year planning. The frequent overshooting of expenditure ceilings reflects weak spending management practices and the limited effectiveness of ceilings due to frequent underestimation of spending needs during budget preparation. This is partly due to a short-term approach to budgeting. Greater emphasis on medium-term fiscal planning is needed to ensure a gradual and credible deficit reduction. Completing the introduction of multi-annual expenditure ceilings linked to fiscal objectives, as done for instance in the Netherlands (OECD, 2025[45]), would support a more systematic integration of the medium-term effects of spending decisions into budget planning. This, in turn, requires major improvements in the accuracy of forward-year forecast baselines. Additionally, limited time for budget preparation limits the Ministry of Finance’s ability to engage with line ministries early in the budget cycle. As noted by the Committee of Senior Budget Officials in the context of its accession review, providing more time could strengthen the Ministry of Finance’s ability to assess spending requests, to pursue fiscal impact assessments, while allowing the Ministry of Finance to play a more proactive coordination role in managing spending ceiling adjustments and shaping the overall budget in situations of fiscal pressures.
Romania should ensure that the independent fiscal institution (IFI), the Fiscal Council, has sufficient resources to fulfil its mandate. The Fiscal Council is recognised as independent and produces technically robust assessments of the fiscal impact of budget measures, monitors budget execution and compliance with fiscal targets (OECD, 2022[25]). Its mandate has recently been expanded to cover evaluations of spending reviews, but it faces persistent staffing shortages, with fewer than half of its 20 positions filled (European Commission, 2025[30]). Without adequate resources, the Council will struggle to deliver on its expanded remit and sustain the frequency and depth of its analyses. While it maintains strong media visibility, its role in policy dialogue and budget preparation is limited. Stronger involvement in budget monitoring could enhance its role, though any expansion of its duties would necessitate additional resources.
Parliamentary scrutiny of the budget could be strengthened. The timetable for review is compressed, technical staff to support committees are limited, and the complex presentation of budget data complicates oversight. Submitting the budget earlier, extending the review period, and improving budget information would enable more meaningful scrutiny, and would allow input from expert consultations and civil society. Building up Parliament’s analytical capacity – for instance through a Parliamentary Budget Office, as seen in several OECD countries – could provide lasting support for evidence-based oversight (OECD, 2022[25]).
The Romanian Ministry of Finance has taken a welcome step toward integrating climate-related risks into fiscal planning by including a model-based assessment of potential macro-fiscal impacts of natural disasters in its 2022-2024 Fiscal-Budgetary Strategy (see Chapter 3), including their potential effects on the budget deficit and public debt.
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