Romania’s GDP rose by 4.1 pct in 2018, slowed down in Q4

Sorin Melenciuc 14/02/2019 | 09:36

Romania’s gross domestic product (GDP), the index widely used to measure the size of national economies, rose by 4.1 percent last year, the lowest pace since 2015, according to National Institute of Statistics (INS) flash estimate released on Thursday.

In the last quarter of 2018, the Romanian economy grew by 4.1 percent (gross series) an by 4 percent (seasonally adjusted data) compared with the last quarter of 2017.

Compared with Q3 2018, Romania’s GDP rose by 0.7 percent in Q4 2018, the 9th quarter in a row of increase.

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

“We expect household consumption to remain the main driver on the demand side as suggested by the sequential acceleration in retail sales. Net exports are likely to show a stronger negative contribution to quarterly growth. On the supply side, we expect weakness in industry due to softer external demand and agriculture after a strong third quarter and some improvement in the service sector,” ING Bank analysts said in a research note.

Romania’s statistical office also slightly revised GDP data for the first couple of quarters of the year.

In 2017, Romania’s GDP recorded a growth of 7 percent in real terms, up to RON 856.7 billion (EUR 187.5 billion), according to INS revised data.

A recent BR Analysis showed that Romania is close to hit two major thresholds this year in its development course, as the GDP growth rate registered in 2018 has increase its chances to achieve two major targets: a GDP of EUR 200 billion and a GDP per capita of EUR 10,000.

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

Last year, Romania’s current account balance of payment registered a deficit of EUR 9.42 billion – or 4.7 percent of GDP -, up 58 percent against 2017.

In its February 2019 Inflation Report, Romania’s central bank expects the C/A deterioration to continue in 2019 and its financing structure to remain “problematic”.

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.

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