Erste Group’s decision came after flash data from Romania’s statistics board INS regarding the country’s gross domestic product (GDP) for the third quarter of 2024 came in significantly below expectations, registering 0.0% quarter-over-quarter (q/q) growth and 1.1% year-over-year (y/y) growth. Erste had anticipated a 0.5% q/q and 2.0% y/y increase, while Bloombergs consensus was at 0.6% q/q and 1.6% y/y.
After nine months, Romania’s economy has grown by only 0.9% y/y.
“Given the limited details provided by the National Institute of Statistics at this time, we can only speculate on the reasons behind these disappointing results”, Erste says in its report.
The Group points out that high-frequency indicators suggest that consumption decelerated in Q3 2024. Net exports likely continued to weigh negatively on economic growth, though monthly international trade data indicates that the impact may have softened this quarter compared to the previous one. “Agriculture remains a major uncertainty and concern this quarter. Production figures have been low, hindered by drought, which likely dragged down overall economic growth. On the other hand, investments probably continued to contribute positively, helped by state spending”, the report shows. In light of the recent data, and assuming no significant revisions, we are lowering our full-year economic growth forecast to 0.8%, down from our previous estimate of 1.9%. “We maintain our 2025 growth forecast at 2.8%, although risks lean to the downside, depending on fiscal measures likely to be introduced at the start of 2025”, the report reads. According to Erste analysts, severe heat and drought have impacted production across Europe. The effects of low yields are evident in food prices, particularly in Romania, where vegetable prices have risen for the past three consecutive months at an average of around 3% m/m. In October, fresh fruit prices increased by nearly 8% m/m. “The upcoming breakdown of Q3 2024 GDP data will likely highlight how this poor agricultural year has significantly weighed on economic growth”, the report concludes.