Economy flatlines in Q1

GDP unchanged in Q1: A second release confirmed that GDP flatlined on a seasonally adjusted quarter-on-quarter basis in Q1 (Q4 2024: +0.5% s.a. qoq). This confirms a volatile, yet consistent, pattern seen over the last six quarters, where modest growth is interspersed with slight deteriorations. On an annual basis, economic growth slowed to 0.4% in Q1 from 0.5% in the previous period.

Slower private consumption offsets stronger exports and fixed investment: The sequential result chiefly reflected softer momentum in private consumption growth, which slowed to 0.3% in Q1 from 1.1% in Q4. Political turmoil and uncertainty—stemming from the annulment of the first round of the 2024 presidential election and subsequent protests—weighed on consumer confidence. Moreover, public consumption dropped at the sharpest pace in a year, contracting 1.1% (Q4 2024: +3.2% s.a. qoq) as the authorities sought to rein in one of Europe’s largest budget deficits. On a more positive note, fixed investment rebounded, growing 18.9% in Q1 and contrasting the 10.7% contraction logged in the previous quarter. On the external front, exports of goods and services bounced back, growing 3.4% in the first quarter (Q4 2024: -1.7% s.a. qoq)—the best reading since Q3 2022—due to the country’s full integration into the Schengen Area from January. Meanwhile, imports of goods and services growth sped up to 3.8% in Q1 (Q4 2024: +2.8% s.a. qoq).

GDP growth to remain below trend: Our Consensus is for sequential GDP growth to have returned in Q2 and to broadly stabilize around that level in H2, supported by stronger EU demand. For 2025 as a whole, the economy is set to accelerate 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, keeping 2025 GDP growth below the 10-year pre-pandemic average. Stronger-than-anticipated economic momentum in top trading partner Germany remains an upside risk.

Panelist insight: Commenting on the outlook, ING’s Valentin Tataru stated: “Looking ahead, the outlook is clouded by the upcoming fiscal consolidation package. New tax measures are likely to weigh on consumption and private investments. At the same time, the liberalisation of electricity prices from July 2025 could trigger a sharp rise in energy costs. […] We now expect the 2025 GDP growth to come at 0.8%, with risks still skewed to the downside. Investments, particularly those linked to EU funds and a more promising agricultural season, are the main drivers that could provide some support in the second half of 2025.”

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