BUCHAREST (Reuters) - Romania's coalition government will raise the monthly gross minimum wage by 9.5% to 4,050 lei ($884.61) from January, Prime Minister Marcel Ciolacu said on Wednesday after meeting employers and unions.
The European Union state holds presidential and parliamentary elections in November and December and the government has raised the minimum wage and increased state pensions twice, increasing an already large budget deficit.
The widening fiscal shortfall and strong wage gains have aggravated Romania's inflation, which is the highest in central and eastern Europe and will likely stay above the target of 1.5% to 3.5% through 2027, S&P Global Ratings said earlier this month.
In addition to the 9.5% increase, the government also said it plans to extend a tax exemption for up to 300 lei of the wage.
Romania has yet to unveil a 2025 budget plan, but analysts and ratings agencies expect some measure of tax hikes to be enforced to shore up public finances.
Earlier on Wednesday, Ciolacu said Romania has a seven-year deficit reduction plan agreement with the European Commission, but the country has yet to submit its plan.
Fiscal consolidation is key to ensuring Romania continues to receive billions of EU recovery and development funds - roughly 74 billion euros by 2027 - which are underpinning infrastructure investment and economic growth.
Romania initially committed to bringing its budget deficit below the EU's ceiling of 3% of GDP by 2024. Instead, the country's independent fiscal watchdog expects the gap to rise to around 8% of economic output.