Slovenia’s GDP grew 0.7% YoY in Q2 2025, while Romania’s economy expanded by 2.1%. For Slovenia, heavy reliance on external trade leaves growth vulnerable to the global trade disputes, even if the impact is indirect. Romania, meanwhile, is grappling with significant domestic challenges, with the effectiveness of its recently announced fiscal package in addressing fiscal imbalances and inflationary pressures still to be proven.

Slovenia

In Q2 2025, Slovenia’s GDP grew 0.7% YoY. Domestic expenditure rose 3.6%, driven by a 2.4% increase in final consumption expenditure and a strong 7.5% rise in fixed capital formation. The main boost in the fixed capital formation came from higher inventories, which contributed 1.7 p.p. to GDP growth. Gross fixed capital formation fell by 0.2%, a milder decline than in previous quarters.

Construction investment posted its first increase in four quarters, rising 0.5%, supported by a 4.9% surge in non-residential building and structure investment (adding 0.3 p.p. to GDP growth). In contrast, residential investment fell 10.2% (subtracting 0.3 p.p.). Investment in equipment and machinery declined 1.3%, with transport equipment down 6.7%, while other equipment and machinery saw a modest 0.6% increase after five quarters of contraction.

On the other hand, household consumption expenditure grew 3.6%, with services leading at +4.5% YoY. Spending on durable goods rose 3.3%, semi-durable goods 3.7%, and non-durable goods 1.6% YoY. General government final consumption fell 0.5%, driven by lower collective consumption, while individual consumption rose 1.8% YoY.

External trade was a drag – exports fell 0.8%, with goods exports down 1.4%, and services up 1.6%, while imports rose 2.7% (goods +2.9%, services +1.8%). The total external trade balance negatively contributed 2.7 p.p. to the GDP growth.

Slovenian GDP YoY growth rates (Q1 2015 – Q2 2025, %)

Source: SURS, InterCapital Research

By sector, value added in the economy rose 0.6%, led by construction (+3.9%), information and communication (+2.8%), and professional, scientific, technical, administrative, and support services (+2.7%). Public administration, education, health, and social work activities grew 2.2%, contributing 0.3 p.p. to GDP. On the other hand, manufacturing contracted again (-1.9%, subtracting 0.4 p.p.), while financial and insurance activities fell 1.2% (-0.1 p.p.).

As a small and open economy, Slovenia remains heavily dependent on external trade. While domestic consumption has shown a notable recovery compared to previous quarters, the ongoing global trade tensions and recently imposed US tariffs on the EU could pressure its export-driven growth model. The full impact of these measures is yet to be felt, though recent developments suggest uncertainty may persist – albeit to a lesser degree than just weeks ago.

Romania

Moving to the eastern flank of the Balkans, Romania’s GDP expanded by 1.2% QoQ in the second quarter of 2025. Compared to the same quarter in 2024, output grew by 2.1% on a seasonally adjusted basis. In the first half of the year, GDP rose by 1.4% versus the same period last year.

Seasonally adjusted quarterly YoY GDP development (2010-2025, %)

Source: Romanian Institute of Statistics, InterCapital Research

While the unadjusted series pointed to sluggish growth of just 0.3% YoY, the more relevant seasonally adjusted figure market the strongest pace since Q4 2023. On a quarterly basis, the 1.2% increase was the best performance since the immediate post-COVID recovery, though that period is not directly comparable. But is this expected to continue?

Following a turbulent political cycle with multiple elections over the past year and a half, inflation was fueled by strong government consumption. This, however, has pushed the public deficit to unsustainable levels, prompting the government to simultaneously cut expenditures and raise revenues. You can read more about the recently announced fiscal package here, as we discussed it in our previous blog. Inflation was also driven higher by the end of the capped electricity price scheme. Meanwhile, wage growth and retail trade have begun to lose momentum as both cyclical tailwinds faded and consumer uncertainty increased, encouraging more cautious spending.

These factors are likely to weigh on household consumption and could hinder further GDP acceleration. However, if government reforms prove effective, a reduction in the fiscal deficit and a more efficient market environment could help offset these headwinds.