Preliminary data released by the National Statistical Institute in September revealed a 0.8% growth in Romania’s GDP in the second quarter of 2024 compared to the first quarter. However, the first half of the year saw a more modest growth of only 0.5%. While these figures indicate a slight acceleration in economic growth, they are below analyst expectations. This suggests that overall economic growth for 2024 will be lower than previously forecasted.

What is behind the downward revision?

Weakening demand: Despite increased domestic demand driven by higher incomes and lower inflation, businesses have struggled to meet this demand by increasing their supply. This has led to increased imports, which has a negative impact on Romania’s economy.

It could be observed, that all economic sectors have contributed modestly, or even negatively, to Romania’s GDP. Agriculture has been hit hard by a summer drought, while industry continues to face challenges from the post-pandemic slowdown. The construction sector, though supported by government investments, is showing signs of weakness in the residential market.

Finally, the services sector, which played a key role in the post-pandemic recovery, is now contributing minimally to GDP growth.

While a planned increase in the minimum wage and pensions will provide a positive boost to the economy in the second half of the year, it is expected to be modest. Our revised forecast for 2024 GDP growth is now 1.8%, significantly below our initial estimate.