Romania to raise minimum wage by 9.5% January 2025

Amid rising inflation concerns, the Romania’s coalition government said it would raise its gross minimum wage by 9.5% to 4,050 lei ($884.61) starting in January 2025.

Romanian Prime Minister,  Marcel Ciolacu, made this announcement 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 had 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.

Aside the improved 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 predicted that tax hikes might be necessary to stabilise public finances.

Although 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.

Recall that Romania has shown committment to reducing its budget deficit to below the EU’s 3% of GDP threshold by 2024, however,  the country’s independent fiscal experts predicted that the deficit would rise to around 8% of GDP, highlighting significant challenge ahead for the government.