Romania: Activity records best reading since Q1 2020 in Q4
A second release showed that the economy contracted 1.4% in annual terms in the final quarter of last year, above the preliminary estimate of a 1.5% decline and softening from the 5.6% drop tallied in the third quarter. All in all, the economy shrank 3.9% in 2020, swinging from 2019’s 4.1% expansion and logging the worst reading in a decade.
Private consumption fell at a sharper rate of 5.5% year-on-year in Q4, deteriorating from the 4.3% contraction in the previous quarter. Moreover, government spending dropped for the first time since Q2 2018, declining 1.2% (Q3: +3.5% yoy). However, fixed investment grew at a stronger rate of 6.5% in Q4 compared to the 2.7% increase recorded in the prior quarter.
On the external front, exports of goods and services contracted at a slower pace of 3.1% year-on-year in the fourth quarter (Q3: -5.2% yoy). Meanwhile, imports of goods and services flatlined at the tail end of the year (Q3: -4.3% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth moderated to 4.8% in Q4 from 5.6% in the previous quarter.
Looking ahead, the economy is expected to bounce back from 2020’s pandemic-induced plunge on the back of reviving domestic and foreign demand. Moreover, incoming EU funds and an accommodative monetary policy should further support the recovery. However, much depends on the progress of vaccination efforts at home and in key trading partners, with new strains of Covid-19 and the possible prolongation of restrictions clouding the outlook.
Lauren Braniff, economist at Oxford Economics, said:
“The economy proved more resilient against expended lockdown measures than anticipated, especially the industrial sector. Although restrictions have been mild compared with those in other economies, the state of alert has been extended for another 30 days beginning March 14 and the night curfew will be one hour longer. We forecast pent-up household demand and state investments to drive GDP growth of 5.3% in 2021.”