Romania’s modest 0.2% y/y GDP growth in Q3 jeopardises 2% full-year target

Romania’s GDP rose by real 0.2% y/y in Q3, losing momentum after 1.0% y/y in Q2 and 2.4% y/y in Q1, according to the flash estimate issued by the statistics office INS on November 14.

Romania’s state forecasting body CNP expects 2% GDP growth this year and 3.4% in 2024.

Reaching the target would be possible under the scenario of 3.5%-4% y/y growth in Q4, a performance not likely, although highly possible (on base effects) in Q1, 2024.

In Q3, the industry remained in the red (-5.6% y.y, industrial output index), and agriculture came under pressure from costly inputs but low grain prices that offset the benefits of crops better than last year. The temporary slowdown in private demand caused by high inflation might have impacted the retail sector in Q3 as well.

On the upside, the construction companies are working at full capacity (+11% y/y, works index), and the banks boast record profitability.
Seasonally adjusted GDP advanced by 0.4% q/q in Q3, slowing down after 1.3% q/q in Q2.

However, the outstanding 1.3% q/q advance in Q2 marked the recovery after the visible economic slowdown during the second part of the winter (Q1), prompted by the impacts of the war in Ukraine. Europe’s energy market seems better prepared to face this winter, but risks related to the energy prices persist, amplified by the Middle East developments.

GDP in the 12 months to September increased by 2.4% y/y.

Over the past six years, Romania’s GDP rose pretty steadily at an annualised rate of 2.9% – while the effects of the COVID-19 crisis were quickly absorbed.

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