Realistic Romania 2025 budget deficit target is 7.5% of GDP, president-elect says

BUCHAREST (Reuters) -An "optimistic, realistic" budget deficit target for Romania in 2025 is 7.5% of economic output, President-elect Nicusor Dan said on Thursday, adding that preliminary talks on the 2025 and 2026 budgets do not include tax increases.

Romania ran a deficit of 9.3% of output in 2024.

Failure to quickly enforce credible measures to lower the shortfall means the European Union and NATO member state risks having its access to EU funds blocked and a potential downgrade of its sovereign rating from the last rung of investment grade.

After defeating a hard-right eurosceptic contender in a presidential election this month, centrist Dan faces the task of nominating a prime minister who can put together a team that can deal with public finances.

Romania's 2025 budget targets a deficit of 7% of output - based on an economic growth assumption of 2.5% - which analysts and the European Commission have said is virtually unattainable without additional measures being taken.

"The optimistic, realistic target for 2025 for the deficit is 7.5% of GDP. We need to transfer approximately 30 billion lei ($6.70 billion) within the budget," Dan told reporters after the top court validated the election result. He will be sworn in on Monday.

"In my view, talks on the 2025 and 2026 budgets start from the premise of not hiking taxes," said Dan, who opposed tax increases during his election campaign.

Romania's growth has steadily slowed since a post-pandemic bounce in 2021 and the European Commission, the EU's executive body, forecasts a budget deficit of 8.6% this year and 8.4% in 2026.

Romania is currently hanging on to the lowest investment grade rating from S&P, Fitch and Moody's. All three have it on a "negative" outlook.

A new government will have to involve at least three pro-EU parties to have a majority, while the far-right, which controls a third of parliament, could build on its recent gains to stoke sentiment against budget cuts.

($1 = 4.4746 lei)

(Reporting by Luiza Ilie, Editing by Timothy Heritage)