Economy gathers momentum in Q3

GDP growth surpasses both Q2’s level and flash estimate in Q3: GDP growth ticked up to 2.4% year on year in the third quarter (Q2: +2.2% yoy), marking the strongest growth since Q1 2023. The rise was above the initial estimate of 2.2%. On a seasonally adjusted quarter-on-quarter basis, economic growth was unchanged at 0.6% in Q3, following the previous period's 0.6% increase.

Surging public spending fuels GDP acceleration: On the domestic side, the improvement largely stemmed from surging public consumption: Government spending rose 9.7% in Q3 (Q2: +4.0% yoy). Elsewhere in the economy, momentum cooled: Fixed investment contracted at a sharper pace of 1.9% in Q3 (Q2: -0.9% yoy), and private consumption growth fell to 3.9% in Q3 (Q2: +4.3% yoy), marking the weakest expansion since Q4 2023. On the external front, exports of goods and services deteriorated, contracting 0.4% in Q3 (Q2: +0.5% yoy). In addition, imports of goods and services growth moderated to 3.0% in Q3 (Q2: +4.1% yoy).

Economy to strengthen in 2025: Looking ahead, annual GDP growth should remain near Q3’s level in Q4 before rising through the end of 2025. During next year as a whole, the economy will accelerate above both 2024’s projected level and the prior 10-year average of 2.7% thanks to stronger expansions in fixed investment and exports. Downside risks include a prolonged political impasse, delayed EU funds absorption and weaker-than-expected EU demand due to rising U.S. tariffs under President-elect Trump.

Panelist insight: EIU analysts said: “With consumer inflation slowing, private consumption will remain the main driver of growth in 2025, boosted by still-strong real wage growth. […] After slowing in 2024 amid low take-up of EU funds, we expect gross fixed investment growth to pick up in 2025. However, the absence of a stable government (which is likely to persist until at least the second quarter of 2025) threatens to continue delaying the disbursement of EU funds, and could lead to weaker than expected public investment.”

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