Economy grinds to a halt in Q3

Flat reading underwhelms markets: According to a preliminary estimate, GDP stagnated on a seasonally adjusted quarter-on-quarter basis in the third quarter (Q2: 0.1% qoq s.a.), surprising markets on the downside. On an annual basis, the economy expanded 1.1% in Q3 (Q2: +0.9% yoy).

Downbeat domestic demand likely weighed on result: While the release did not provide a complete breakdown, high-frequency data suggests that private consumption decelerated in sequential terms in Q3; retail sales growth lost momentum in the third quarter compared to the previous quarter. On the production side, industrial output contracted at a steeper quarterly pace in Q3, likely dragged on by drought and protracted weakness in German manufacturing. A complete breakdown will be released on 6 December.

Growth to return but remain underwhelming: Though our panelists forecast the economy to return to growth in Q4, economic growth is set to remain downbeat in 2024 as a whole—weighed down by a poor performance in H1 and sluggish demand in the EU—and post the worst result since 2014, barring 2020’s pandemic-induced downturn. Moreover, our panelists expect growth to pick up but remain below its pre-pandemic 10-year average in 2025 due to weaker private consumption growth and spillovers from persistent weakness in the German economy—Romania’s main trading partner.

Panelist insight: Commenting on the reading, Vlad Ionita, analyst at Erste Bank, stated: “In light of the recent data, and assuming no significant revisions, we are lowering our full-year economic growth forecast to 0.8%, down from our previous estimate of 1.9%. We maintain our 2025 growth forecast at 2.8%, although risks lean to the downside, depending on fiscal measures likely to be introduced at the start of 2025.”

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