Romanian inflation to rise over higher VAT, warns Fitch Ratings

Business Forum

16 July, 2025 at 9:11 AM

Romania's fiscal package is expected to have a substantial budgetary impact, estimated at 1.1% of GDP this year and 3.5% in 2026, finds an analysis by Fitch Ratings.

The consolidation plan is evenly split between revenue-generating and expenditure-cutting initiatives. The first wave of measures is set to take effect on August 1, with additional actions following on January 1 2026.

A key revenue component for this year includes a 2 percentage point increase in the standard VAT rate to 21%, and a unification of the current reduced rates of 5% and 9% into a single 11% rate, effective from August.

“This will generate higher inflation, which will further erode real incomes,” wrote the agency's analysts.

Romania's annual inflation rate rose to 5.7% in June 2025, up from 5.45% in May.

In a positive sign for investor confidence, Romania successfully issued €5 billion in euros and US dollars on the international bond market immediately following the fiscal consolidation announcement, attracting strong demand.

Government bond yields have also seen a decrease from their early May highs, though they remain above pre-November 2024 levels.

EC slashes Romania's growth forecast to 0.1%

The European Commission has significantly reduced its estimates for Romanian economic growth this year to 0.1%, down from 1.1% estimated in autumn, while the inflation rate is expected to reach 7%, compared to the previously announced level below 6%, according to spring economic forecasts published Thursday.

Economy

Romania's inflation to spike in Q2 2026, says central bank

Romania's central bank announced on Friday that annual inflation will rise above previously forecast levels in Q2 2026, but will experience a substantial downward correction in Q3.

Economy

Romania's budget deficit drops to 5.72% on 10 months

Romania's consolidated general budget recorded a deficit of €21.8 billion (RON 108.87 billion) in the first ten months of 2025, representing 5.72% of GDP. This marks a decrease of €110 million compared to the same period in 2024, when the deficit stood at 6.22% of GDP.  

Economy

Fiscal package to push Romanian inflation to over 7%, says ING

Inflation will increase over the planned fiscal package announced by Romania's Government, which includes the increase of fuel excises.

Economy

Romania to hike VAT starting August in budget balancing move

Romanian PM Ilie Bolojan announced on Wednesday a raft of measures designed to support the reduction of the country's budget deficit.

Economy

MPs vote new Government in Romania

The new Government led by PM Ilie Bolojan has been voted in Parliament, raising 301 votes from Senators and Deputies.

Economy

CFA Romania: Macroeconomic confidence index sees strong increase in May 2025

The Macroeconomic confidence index, compiled by the CFA Romania Association, registered a significant increase in May 2025, rising by 11.5 points to a value of 44.9 points.