Economy slips into contraction in Q3 2025

The economy shrinks on a sequential basis: According to a flash release of national accounts data, Romania's GDP contracted 0.2% on a seasonally adjusted quarter-on-quarter basis in Q3, following a downwardly revised 1.0% expansion in the previous quarter. In seasonally adjusted annual terms, economic output increased 1.4% in Q3, following a 2.2% expansion in the previous quarter and overshooting market expectations.

Contraction likely driven by domestic demand: While a full breakdown has yet to become available, preliminary data suggests that stronger electricity price pressures throughout the quarter plus recent VAT hikes and excise duties will have weighed on domestic demand in Q3, hurting overall economic momentum. A more detailed breakdown of the third quarter’s national accounts data will be published on 5 December.

GDP growth to pick up ahead; fiscal consolidation looms: Following Q3’s reported contraction, our panelists expect the economy to stagnate in seasonally adjusted quarter-on-quarter terms in the final quarter of the year, before regaining steam and stabilizing slightly below Q2’s rate through 2026. Looking at 2026 as a whole, GDP growth is set to accelerate in annual terms from 2025, supported by robust domestic demand growth. That said, the government’s fiscal consolidation efforts may weigh on public consumption as it seeks to achieve the EU's target of a 6% fiscal deficit by the end of next year. Budget talks and EU fund inflows and absorption are key to monitor.

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