Romania’s economy expanded by just 1.1% year on year in Q3 (chart), disappointing many analysts and bringing the year-to-date growth rate to only 0.9% y/y in January-September, according to flash estimate data published by the statistics office INS. 

Previously, 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, also including industry and constructions, while identifying the growth drivers is a more complicated task: the retail and financial services are the main suspects. 

Banks have capitalised on lower interest rates and resumed retail lending that on the 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 bleak, driven by the disappointing crops in agriculture.

In Q3, the seasonally adjusted GDP has not changed from Q2, versus a 0.6% quarter-on-quarter 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 already revised downward its projection for the full year 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.