Romania: Economic growth accelerates to one-year high in Q1 on double-digit growth in private consumption
June 7, 2016
In the first quarter of 2016, the economy expanded 4.3% over the same period of the previous year, according to more detailed data released on 7 June. Q1’s reading marked an acceleration from Q4’s 3.8% expansion and matched the figure reported in the preliminary estimate. The register tallied in the January to March period is the highest in one year and was underpinned by buoyant domestic demand. On a quarter-on-quarter basis, GDP rose 1.6% in seasonally-adjusted terms in Q1, which followed the 1.1% rise tallied in Q4.
Private consumption grew a solid 10.0% in the first quarter, which was stronger than the 7.6% increase observed in Q4 and marked the largest expansion since Q3 2008. The government has hiked wages by 25% for the public sector and enacted a series of tax cuts ahead of key elections this year that have spurred a consumption boom in the country. Growth in government spending accelerated from 1.3% in the fourth quarter to 2.8% in the first quarter of this year as the government stepped up spending ahead of the November elections. By contrast, growth in fixed investment eased from 11.0% to a still-solid 7.0% in Q1. The drying up of EU-investment funds was behind this deceleration.
On the external side of the economy, exports swung from a 1.5% drop in Q4 to a 1.2% expansion in Q1. Growth in exports was underpinned by strong domestic demand from EU-states. Imports sped up from a 3.9% growth in the fourth quarter to a staggering 8.0% rise in the first quarter, highlighting strong private consumption. As imports grew at a faster pace than exports, the external sector’s net contribution to overall economic growth deteriorated notably from minus 3.5 percentage points in Q4 to minus 7.5 percentage points in Q1.