Romania's GDP up 0.9% y/y in Jan-Sep, negative base effects expected for Q4

Romania's economy increased by 1.1% y/y in Q3, disappointing many analysts and bringing the ytd growth rate to only 0.9% y/y in January-September, according to flash estimate data published by the statistics office INS. A Bloomberg survey indicated expectations for 1.6% y/y growth in Q3.

Agriculture adds to the long list of economic sectors that dragged the economic performance down (including industry and construction) – while identifying the growth drivers is a more complicated task: the retail and financial services are the main suspects. Banks have capitalized on lower interest rates and resumed retail lending that, on top of higher incomes, resulted in impressive retail sales (and external deficit) figures.

The seasonally adjusted data, significantly altered by the unusual pattern in the base year (2020) and repeatedly backward revised, show the country's economy has virtually stagnated for five consecutive quarters already. The outlook for Q4 is bleaked by the disappointing crops in agriculture.

In Q3, the seasonally adjusted GDP has not changed from Q2, versus a 0.6% q/q advance expected by analysts surveyed by Bloomberg.

In each of the first three quarters of 2024, Romania's economy performed worse than in Q4 of 2023 – in seasonally adjusted terms.

Assuming the country's economy stays at the same level in Q4, the full-year growth will deteriorate from 0.9% y/y in January-September.

Erste Group has already revised its projection for the full year downward to 0.8% (from 1.9% previously – as the Austrian financial group was among the latest to revise its initially bullish forecast). It maintained its 2.8% forecast, with negative risks and high uncertainty related to the effects of the fiscal consolidation package for 2025.

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