Slower expansion in Q1 Romanian consumer spending reported in revised GDP figures
Romania's Q1 GDP Stagnates Amid Economic Challenges
Romania's economy showed signs of stagnation in the first quarter of 2025, with the country's GDP growing annually by 0.3% and remaining unchanged quarter-on-quarter (q/q), according to revised data released by the National Institute of Statistics.
The stagnation in GDP growth was particularly noticeable in the services to households sector, which contracted by 1% year-over-year (revised from a marginal increase of 0.1% initially). This contraction was driven by several key factors.
General GDP growth slowed significantly, with seasonally adjusted GDP growth improving only slightly to 0.6% from 0.4% in the previous quarter. However, this growth was insufficient to offset the overall stagnation compared to the previous quarter’s 0.5% expansion. On an annual basis, GDP growth eased to 0.3%, down from 0.5% in the previous period.
Household final consumption only grew moderately by 1.1%, indicating weaker demand from households, which directly affects the services to households sector. This modest increase in household consumption contrasts with the stagnant overall economic activity.
Government consumption expenditure declined slightly by 0.2%, further contributing to slower demand in various services.
Negative net export contribution of 2.8% stemmed from a 0.9% fall in exports and a 3.7% increase in imports, suggesting external demand pressures that indirectly impact household services and the broader economy.
Additional macroeconomic factors impacting the services sector include a 2.5% decrease in average net salary in May 2025 compared to April, and rising inflation (5.7% in June), which likely restrained household spending power and demand for services.
The wider economic environment is characterized by fiscal austerity measures estimated to reduce GDP by about 1.1% in 2025, which dampen growth prospects broadly, including in the household services sector.
Despite the contraction in the services to households sector, there were some positive developments in Q1 2025. The key IT sector posted a 0.9% year-over-year advance, and construction surged by 9.9%. Net taxes and subsidies also rose by 7.2% year-over-year (revised from +3.5% initially).
The revision of Q1 data confirms Romania's GDP continued its quasi-stagnation in Q1, with the gross value added generated in Q1 contracting by 0.3% year-over-year (revised from -0.1% initially). Foreign trade data was also revised, with net imports accounting for 6.2% of domestic demand for consumption and investments (in line with the long-term trend). This is lower than the initially estimated record 7.5%.
Over the five quarters to Q1 2025, Romania's GDP averaged a 0.1% quarterly growth, indicating a slow and steady recovery from the economic challenges faced in previous quarters. The average annual GDP growth over the same period was 0.3%.
In conclusion, the stagnation in Romania's GDP, particularly in the services to households sector, is driven by modest household consumption growth amid declining government spending, weakening external trade, reduced real incomes, inflationary pressures, and fiscal tightening. These factors combined act to limit expansion in services aimed at households during Q1 2025. However, there are signs of resilience in other sectors, such as construction and IT, which offer hope for a more balanced recovery in the coming quarters.
[1] National Institute of Statistics (INS), Romania - Quarterly National Accounts (QNA) [2] National Institute of Statistics (INS), Romania - Labour Force Survey (LFS) [3] European Commission - Economic and Financial Affairs (ECFIN) - Short-term Economic Forecast (STEF) [4] European Commission - Directorate-General for Economic and Financial Affairs (DG ECFIN) - Economic forecast for Romania [5] European Commission - Directorate-General for Economic and Financial Affairs (DG ECFIN) - Country Report on Romania
- The stagnation in Romania's GDP growth, as shown in the Q1 of 2025, is affecting various sectors, including the services, finance, and business sectors, with the services to households sector contracting by 1%.
- The contraction in the services to households sector is mainly due to modest household consumption growth, declining government spending, weakening external trade, reduced real incomes, inflationary pressures, and fiscal tightening, which collectively hamper the expansion in services that cater to households.
