Because of the slower-than-anticipated GDP growth in Q1 (+0.3% y/y) and also accounting for high-frequency data signals for the second quarter, Erste Group has revised its full-year GDP growth forecast for this year to 1.3% from 1.8%. This is close to the government's 1.4% revised forecast issued in May. 

Due to the much-anticipated fiscal consolidation measures, which will likely be implemented later this year, consumption is expected to decelerate further in 2025. Investments will be a key driver for this year's growth story and will be very important to follow the EU Funds absorption. 

The strong negative effect from net exports should be less severe this year, either due to improved external demand or base effects combined with weaker domestic consumption. 

There are also expectations for a better agricultural year which might boost the economic growth, the effects of this will only be seen in the third quarter. 

Erste Group "keeps for now" its GDP growth forecast for 2026 at +3.1% "pending more fiscal clarity" and noting risks to the downside for this figure as well, the financial group's research note reads.

The government's CNP is more cautious, with a 2.4% growth forecast for 2026.

iulian@romania-insider.com

(Photo source: Ifeelstock/Dreamstime.com)