GDP growth improves in Q2

Economic growth picks up: A second release confirmed that GDP growth gained pace in the second quarter. It accelerated to 1.2% on a seasonally adjusted quarter-on-quarter basis, up from 0.1% in the first quarter and matched the joint-highest reading since Q1 2022. On an annual basis, economic growth accelerated to 2.4% in Q2, up from the previous period's 0.5% increase and marking the best result since Q3 2023. That said, discrepancies between the gross and seasonally adjusted series suggest that the economy is not as strong as the headline figure implies.

Domestic demand spearheads economic growth: Domestically, public spending rebounded to 4.7% in quarter-on-quarter seasonally adjusted terms in the second quarter (Q1: -6.2% qoq s.a.), posting the strongest result since Q1 2023. Moreover, private spending stagnated in Q2, but improved from the 0.1% contraction recorded in Q1. On a less positive note, fixed investment swung into contraction, falling 9.0% in Q2 (Q1: +18.8% qoq s.a.), likely hampered by a protracted malaise in the industrial sector and a high base effect. On the external front, exports of goods and services contracted 1.2% in Q2 (Q1: +5.6% qoq s.a.), marking a one-year low, likely hit by U.S. import tariffs on cars—about 17% of total merchandise exports—and downbeat economic momentum in Germany, Romania’s top trading partner. In addition, imports of goods and services contracted 1.7% in Q2 (Q1: +3.5% qoq s.a.).

GDP growth to remain weak: In 2025 as a whole, Romania’s economy is set to speed up from 2024’s weak result on the back of a rebound in fixed investment, which will be bolstered by rate cuts and EU funds inflows. According to official estimates, Romania should receive around EUR 16 billion in EU funding in 2025 through the Recovery Plan and cohesion programs, aimed at boosting the construction sector and industrial output. 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 undershoot the 3.1% 10-year pre-pandemic average.

Panelist insight: Commenting on the 2025 outlook, Vlad Ionita, analyst at Erste Bank, stated: “We maintain our GDP growth forecast for this year […]. The risk profile is rather balanced in our view currently. Even with some moderately negative quarterly growth rates in in the last two quarters of the year - which is not our baseline scenario currently - the GDP growth remains around 1% this year.”

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