Romanian Government To Raise Minimum Wage By 9.5% Starting January 2024

Romania’s coalition government will raise its gross minimum wage by 9.5% to 4,050 lei ($884.61) starting in January 2024, Prime Minister Marcel Ciolacu announced on Wednesday after consultations with employers and unions. This move comes ahead of Romania’s presidential and parliamentary elections set for November and December. In recent months, the government has also raised state pensions twice, further widening the country’s budget deficit.

The increasing fiscal shortfall and significant wage hikes have exacerbated Romania’s inflation, which is currently the highest in Central and Eastern Europe. According to S&P Global Ratings, inflation is expected to remain above the target range of 1.5% to 3.5% through 2027.

In addition to the minimum wage increase, the government plans to extend a tax exemption for up to 300 lei of wages. However, Romania has yet to present its 2025 budget plan, and analysts predict that tax hikes may be necessary to stabilise public finances.

Prime Minister Ciolacu also mentioned Romania’s seven-year deficit reduction plan agreement with the European Commission. While the country has yet to submit this plan, fiscal consolidation remains critical for Romania to continue receiving EU recovery and development funds, amounting to roughly 74 billion euros by 2027. These funds are essential for infrastructure development and economic growth.

Initially, Romania committed to reducing its budget deficit to below the EU’s 3% of GDP threshold by 2024. However, the country’s independent fiscal watchdog predicts the deficit will rise to around 8% of GDP, highlighting the challenge ahead for the government.

Melissa Enoch