Romania’s economy grew by 2.5 percent in 2011

A flash estimate from the National Statistics Institute (INS) made public last week indicated that Romania’s GDP had increased by 2.5 percent in 2011. The euro zone economy gained 1.5 percent while EU 27 grew by 1.6 percent, according to statistical bureau Eurostat.

“The economic growth registered last year was fueled by exports of industrial output and a good harvest year, but these growth engines will slow down this year, due to a sharp decrease in investments,” Melania Hancila, head of the research and strategy department at Volksbank, told BR.

Hancila says that a slow recovery has been registered in construction and retail, on a favorable basis effect, following the steep contractions of the previous years.
INS data also show the economy decreased by 0.2 percent from Q3 to Q4 of 2011, although the growth in Q4 was 2.1 percent versus Q4 2010. In Q4, the EUR 27 lost 0.3 percent. The Volksbank economist says the economy will further shrink in the first quarter of this year, due to bad weather and a lack of stimulus for the real economy. Thus, two consecutive quarters of GDP decrease will see Romania slip back into recession.

“We forecast the economy will slow its growth to 1 percent y/y in 2012,” says Hancila. “We will have a modest GDP growth, as this year elections will be organized, and authorities will pour money into the economy,” she adds.

The acceleration of infrastructure projects, increases in pensions and salaries, plus advances in EU-funded projects should help the economy avoid the black clouds of recession.
Foreign direct investment totaled EUR 1.9 billion in 2011, down 80 percent from the all-time high of 2008, according to data from the National Bank of Romania. However, the country is focusing on public investments and EU-funded projects to grow the economy. The government has set an ambitious target of EUR 6 billion in EU funds attraction. At the same time, the authorities want to lower the deficit to 3 percent of GDP on EAS standards this year, from 4.2 percent in 2011.

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