Romania: Economy grows at softest pace since Q1 2021 in the second quarter
GDP growth moderated to 1.1% year on year in the second quarter from 2.4% in the first quarter. Q2’s reading marked the softest expansion since Q1 2021.
Household spending growth fell to 1.7% in Q2, marking the weakest expansion since Q1 2021 (Q1: +6.4% yoy). Public consumption dropped at the sharpest pace since Q1 2023, contracting 1.1% (Q1: +9.2% yoy). Meanwhile, fixed investment growth improved to 11.7% in Q2, from the 10.4% increase in the previous quarter.
Exports of goods and services plunged at the steepest rate in over two years, falling 1.2% in the second quarter (Q1: +0.3% yoy). In addition, imports of goods and services deteriorated, contracting 3.4% in Q2 (Q1: +0.4% yoy).
On a seasonally adjusted quarter-on-quarter basis, economic growth improved to 0.9% in Q2 from the previous period’s 0.5% increase.
On the outlook for 2024, Valentin Tataru, economist at ING, commented:
“While GDP growth perspectives for 2024 are likely to disappoint, we hold on to our 3.7% estimate. We think that weak external demand, still-high interest rates and the EU-agreed fiscal consolidation could be a drag on output. That said, a still-strong EU Funds absorption and sustained infrastructure investments should continue to impact growth positively. Moreover, 2024’s four rounds of elections might derail the fiscal adjustment and thus keep a larger fiscal stimulus in place until 2025.”