Romania Announces 22.7% Increase in Average Monthly State Pensions

Romania's average monthly state pension will rise by 22.7% from September, adding $2.09 billion in costs to the 2024 budget. This move follows legislation agreed with the EU to make the pension system sustainable. However, it puts pressure on the country's budget, which is already in deficit.

The average monthly state pension in Romania will rise by 22.7% from September after a planned recalculation, the labour minister announced on Wednesday. This increase will add an extra 9.45 billion lei ($2.09 billion) to the already strained budget for 2024.

Romania passed legislation agreed with the European Union in exchange for recovery funds aimed at putting its state pension system on a sustainable path. However, the reforms come at a short-term cost. The measures are aimed at eliminating inconsistencies in pension calculations, making future hikes predictable, and encouraging later retirement. Nevertheless, the recalculations and additional increases anticipated for 2024 have analysts warning about the financial pressure on the budget.

As Romania faces national and presidential elections later this year, the country saw its budget deficit widen to 3.6% of its economic output by June, making a 5.0% GDP target for the full year seem unattainable. Under EU scrutiny since 2020 due to its excessive deficit, Romania must present a plan to reduce its deficit below 3% of GDP. With tax revenue lower than the EU average, the nation may face further tax hikes by 2025. ($1 = 4.5167 lei).

(With inputs from agencies.)