Growth strengthens in Q4, but weakens over 2024 as a whole

Sequential growth accelerates to an over one-year high in Q4: A second release confirmed that GDP growth rose to 0.8% on a seasonally adjusted quarter-on-quarter basis in Q4 (Q3: +0.1% qoq s.a.), marking the strongest expansion in over a year. On an annual basis, GDP growth softened to 0.7% in Q4 (Q3: +1.2% yoy). That said, GDP growth fell to 0.9% in 2024 as a whole (2023: +2.4%), marking the weakest result since 2013, barring 2020’s pandemic-induced downturn.

Private consumption leads the charge: The sequential jump chiefly reflected a recovery in private consumption: Household spending bounced back 1.5% in Q4 (Q3: -0.3% qoq s.a.). That said, public consumption plunged 5.4% in Q4 (Q3: +1.4% qoq s.a.), hampered by the European Commission's excessive deficit procedure. Moreover, fixed investment contracted 3.9% in the same quarter (Q3: -0.1% qoq s.a.), posting the fourth consecutive decline. On the external front, exports of goods and services slid at a softer rate of 1.5% in Q4 (Q3: -3.1% qoq s.a.). Meanwhile, imports of goods and services rebounded, rising 2.4% in Q4 (Q3: -3.8% qoq s.a.), weighing on the overall result.

Downside risks to growth mount: Our panelists forecast the economy to be expanding at a softer pace compared to Q4 in Q1 2025. In addition, risks are tilted to the downside, as elevated domestic and international political uncertainty could weigh on private consumption, the main engine of the Romanian economy; consumer sentiment crumbled to the lowest level since April 2023 in January and remained subdued in February. For 2025, our panel has cut its GDP growth forecast by 0.5 percentage points since December 2024: Rising U.S. protectionism, the European Commission's excessive deficit procedure, political instability and weaker growth prospects in the EU have weighed on the outlook. As a result, economic growth is projected to undershoot the pre-pandemic 10-year average of 3.1% overall in 2025, though it should accelerate from 2024.

Panelist insight: Vlad Ionita, analyst at Erste Bank, commented: “The announced fiscal consolidation will most likely weigh in on consumption which we see decelerating significantly in 2025. Investments will be a key driver for this year’s growth story and it will be very important to follow the EU Funds absorption. The strong negative effect from net exports should be less severe this year, either due to improved external demand or base effects combined with weaker domestic consumption.”

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