Economy slows down in Q2 – growth in H1 was just 0.7%. Bankers lower 2024 forecasts

Data released by the NIS show a GDP growth well below expectations, of just 0.1%, in the second quarter compared to Q1/2024, putting at risk the attainment of the growth target for the entire year.

Overall, the Gross Domestic Product (GDP) rose by 0.7% (raw series) in the first half of this year against the first half of 2023, and by 1.5% (seasonally adjusted series), significantly below the market expectations of 2.3%.

Causes: falling industry and residential construction

Although the elements leading to economic growth delay in Q2/2024 have not been published, ING Bank analysts stress the following aspects:

• Data released so far show an acceleration in private consumption, supported by double-digit real wage increase and by consumer loans.

• Net exports are likely to continue disappointing and holding back economic growth

• Moreover, inventories may also have contributed to the decline in GDP.

• Possible delays in investment works could have negatively influenced Q2/2024 GDP.

In terms of supply, industry continued to underperform in Q2/2024, with residential and commercial construction declining, with only engineering showing increase.  

Banks revise 2024 forecasts

Based on macro data presented so far, ING Bank analysts announce the downward revision of the GDP growth forecast from 2.8% in 2024 to 2%, considered to be still an optimistic estimate.

Similarly, Erste Bank economists report that a downward revision forecast is most likely to follow for the entire year, from 2.6%. They too anticipate a full-year GDP growth of around 2%.

In the spring forecast, the National Commission for Strategy and Prognosis projected a very optimistic GDP growth of 3.4% for this year, a strong advance compared to 2.1% in 2023.

GDP growth in Q1/2024 was 0.3% in the EU

Seasonally adjusted GDP rose by 0.3% in both the eurozone and the EU in the second quarter of 2024 compared to the previous quarter, according to a first estimate published by Eurostat, the statistical office of the European Union. GDP had increased by 0.3% in both the eurozone and the EU in the first quarter of 2024 as well. Compared to the same quarter of the previous year, seasonally adjusted GDP increased by 0.6% in the eurozone and by 0.8% in the EU in the second quarter of 2024, after +0.5% in the eurozone and +0.6% in the EU in the previous quarter.

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