RO: Full year 2025 GDP growth revised down at 1.3%
The publication of the structure of the GDP growth in the first quarter brought no major data revisions. The economy stagnated in sequential terms in 1Q25 and advanced by only 0.3% in annual terms. On the demand side consumption remains the main growth driver. Investments had an underwhelming but positive contribution while inventories added 1pp. But almost all of the growth was offset by net exports. On the supply side the structure remains weak, with a negative contribution from industry, a shy positive contribution from construction and some relief coming from net taxes. The other components had a close to zero contribution.
Even if the annual growth rate in the first quarter was slightly revised to the upside by 0.1pp at 0.3% in 1Q25, it still falls short of our initial expectation. Because of this and also accounting for high frequency data signals for the second quarter we revise our full year GDP growth forecast for this year at 1.3% from 1.8%. Due to the much-anticipated fiscal consolidation measures which will likely be implemented later this year, consumption is expected to further decelerate in 2025. Investments will be a key driver for this year 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. We keep for now our GDP growth forecast for 2026 at +3.1% pending more fiscal clarity but we see risks to the downside for this figure as well.
On the supply side, agriculture had a neutral contribution to the +0.3% y/y growth the first quarter of 2025. Industry took away 0.5pp while construction added 0.4pp. Services were overall neutral with most of the components having a close to zero contribution. Net taxes added 0.3pp.
On the demand side, private consumption added 1.8pp to the +0.3% y/y growth rate in 1Q25. Investments had a +0.9 contribution and public consumption added 0.7pp. Net exports took away 4.1pp of the annual growth rate while inventories added 1.0pp.