Romania: GDP flatlined in the third quarter
Economy stagnates in Q3: Recently revised data revealed that GDP flatlined on a seasonally adjusted quarter-on-quarter basis in Q3, falling short of the 0.1% expansion logged in Q2. On an annual basis, GDP rose to 1.1% in Q3, improving the previous quarter’s 0.9% expansion.
Domestic demand drags on growth: The quarterly downturn chiefly reflected a deterioration in domestic demand. Household spending contracted 0.5% in Q3 (Q2: +2.8% qoq s.a.), swinging into negative territory for the first time since Q1 2023. Moreover, public consumption decelerated to 1.0% in Q3 (Q2: +3.4% qoq s.a.), and fixed investment contracted 0.3% in Q3 (Q2: -2.1% qoq s.a.), posting the third negative reading this year.
On the external front, exports of goods and services slid at a faster rate of 2.7% in Q3 (Q2: -2.6% qoq s.a.). Meanwhile, imports of goods and services swung into contraction, declining 4.2% in Q3 (Q2: +1.1% qoq s.a.).
Growth to roughly double in 2025: Our panel expects the economy to accelerate sharply in Q4. Looking at 2025, our panelists expect GDP growth to nearly double from 2024’s projected figure. Lower interest rates are set to bolster fixed investment. Moreover, recovering EU demand should drive a rebound in exports. That said, private consumption will be hampered by a largely anticipated tax increase amid fiscal consolidation efforts aimed at reducing the budget deficit.
Panelist insight: ING’s Stefan Posea and Valentin Tataru commented:
“At a technical level, base effects stemming from this year’s low outturn will contribute positively. […] Lower interest rates in the eurozone should limit the downfall of the external sector somewhat, although at this stage our house view is that structural factors will continue to keep European activity in a weak state, at least in the near term. Upside potential could come from a more expansionary fiscal stance in Germany next year, depending on the early election outcome.”
EIU analysts said:
“Investment in public infrastructure will continue to be a bright spot in 2025, owing to inflows of funds under the Next Generation EU programme, assuming no major delays in their disbursement. Following an estimated annual contraction in 2024, we expect a return to positive export growth in 2025 as demand gradually picks up in Romania’s main EU trading partners.”
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