Romania’s GDP surprisingly accelerates in Q3

Romania’s gross domestic product (GDP), the index widely used to measure the size of national economies, jumped by 1.9 percent in the third quarter of this year compared with the second quarter, the fastest pace in a year, according to National Institute of Statistics (INS) flash estimate released on Wednesday.

Compared with the third quarter of 2017, the Romanian economy grew by 4.3 percent (gross series) an by 4.1 percent (seasonally adjusted data), the fastest pace this year.

This rate is much above analysts’ estimates – the Bloomberg consensus of 3 percent year-on-year.

Flash estimate data don’t disclose the drivers of GDP growth but some analysts expected a downturn in economic activity due to weaker activity in Romania’s main trading partners.

“Both high-frequency data (retail sales, construction and industrial production) and GDP readings for the main trading partners, the eurozone as a whole and Germany in particular, posted quite a sharp deceleration and even a contraction. It is possible that inventories were a key factor behind the faster growth rate, as in the second quarter,” ING Bank analysts said in a research note.

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“Given the small open economy status, well integrated into the single market, we expect to see a lagged effect from the eurozone slowdown in the coming quarters,” they added.

Romania’s statistical office also slightly revised upward GDP data for the first couple of quarters of the year and as a result, January-September GDP growth came in at 4.2 percent versus the same period last year.

In 2017, Romania’s GDP recorded a growth of 6.9 percent in real terms, up to RON 858.7 billion (EUR 188 billion), according to INS revised data.

The growth rate recorded in 2017 is the highest since 2008 for Romania and is due mainly to government-led increase in households consumption.

INS data show that household final consumption expenditure, the index measuring what people – acting either individually or collectively – spend on goods and services to satisfy their needs and wants, rose 10.2 in 2017 compared to the previous year.

During the last few years, the government adopted a strategy of wage-led growth, stimulating household consumption and GDP growth rates, but this model has generated larger fiscal and current account deficits.

Official data confirm Romania’s GDP was larger in 2017 than Greece’s GDP, estimated at EUR 177.7 billion, for the first time since the 1970s and ranked 16th among the 28 EU member states.

But Romania is still the second-poorest EU country if we look at the more relevant GDP/capita index, with around EUR 9,600 per inhabitant in 2017.