Page 41 - bne IntelliNews Southeastern Europe Outlook 2025

2.9.1 GDP growth
Based on the 0.8% y/y advance in January-September and considering the negative base effects in Q4, Romania’s economy must have slowed down to an annual growth rate of under 1% in 2024 down from 2.4% in 2023 and 4.0% in 2022.
The country’s economy has thus lagged below the potential growth, estimated at 3%, for the second consecutive year and will probably remain so for at least another year. Intra-annual data show that Romania’s seasonally adjusted quarterly GDP remained virtually flat for four quarters already.
*The y/y growth rates (in the chart above) are calculated based on the GDP production/utilisation structure in base year, as opposed to chain-linked series based on instant structure – which are published as secondary time series.
The volatile agricultural sector, fiscal policy and the external demand are key elements shaping the country's economic growth. The disappointing output in agriculture contributed significantly (-0.6 percentage points in January-September) to the slowdown in 2024 and will perhaps create positive base effects in 2025. The fiscal stimulus (-8%-of-GDP public deficit in 2024) had a positive impact in 2024 and will slow down in 2025. The industrial activity in Europe, particularly important for the country’s industry, kept losing ground in 2024, dragging down the Romanian subsidiaries of foreign groups.
Private consumption was the main growth driver in the first three quarters of 2024 when the growth of households’ consumption expenditure accelerated to 5.5% y/y from 2.7% in 2023. In contrast, gross fixed capital formation was the main driver in 2023 with a 14.5% y/y advance, but it lost momentum to a modest 3% y/y growth in January-September of 2024, despite the major public infrastructure projects.
The robust domestic demand for consumption, however, translated only partly into higher domestic production, while fueling imports to a larger extent. In volume terms, the 3.9% stronger domestic consumption pushed up imports by 3.2% y/y while domestic output (GDP) advanced by only 0.8% y/y. The sluggish GDP advance was partly an effect of weaker external demand (exports contracted by 3.0% y/y).
41 SE Outlook 2025 www.intellinews.com