GDP growth soars in Q2

GDP growth quadruples market expectations: According to a preliminary reading, GDP growth jumped to 1.2% on a seasonally adjusted quarter-on-quarter basis in the second quarter, up from 0.1% in the first quarter. Q2’s reading far exceeded market expectations, posting the strongest expansion since Q4 2022 and the second-fastest rate in the EU. That said, the acceleration was also fueled by revisions and potential discrepancies between the gross and seasonally adjusted series. On an annual basis, economic growth improved to 2.4% in Q2, from 0.5% in Q1, marking the strongest growth since Q3 2023.

Private consumption should have driven the result: The statistical office did not provide a complete breakdown, which will be released on 5 September. That said, available data points to private spending as the main driver of sequential GDP growth, as the unemployment rate declined in Q2 compared to Q1 and retail sales continued to rise in April–June vs Q1. Moreover, fixed investment might have had a positive contribution thanks to EU funds inflows.

Economy to pick up but remain weak: Our Consensus is for quarter-on-quarter GDP growth to slow to Q1 levels in Q3 and gradually pick up in subsequent quarters, supported by less uncertainty in domestic politics. For 2025 as a whole, the economy is set to gain steam from 2024’s weak result, driven by a bounce back in fixed investment—bolstered by rate cuts and EU funds inflows—and in exports. That said, private consumption is expected to lose some traction, as the fiscal consolidation package, including higher VAT and excise from August, will likely drag down household spending in the remainder of the year. As a result, 2025 GDP growth will underperform the 10-year pre-pandemic average. EU funds inflows and absorption are key to monitor.

Panelist insight: Commenting on the outlook, ING’s Stefan Posea stated: “Overall, we maintain our 0.3% estimate for full 2025 GDP growth, with downside risks at play stemming from a lower consumer confidence ahead, partially balanced by the tight deadlines for public investments and the gradual increase in productivity due to ongoing infrastructure upgrades.”

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