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Romania GDP Q4 2018

Romania: Economic growth down marginally in Q4 2018

A second estimate released on 8 April by the Statistical Institute (INSSE) confirmed that the economy grew 4.1% in the fourth quarter over the same period a year earlier, a notch below the third quarter’s 4.2% expansion. The result brought full-year growth to 4.1%, down from the much stronger 7.0% recorded in 2017.

Consumer spending was chiefly behind the fourth-quarter expansion. Private consumption gained steam in Q4 amid a tight labor market and rapid wage growth, rising 5.9% in year-on-year terms (Q3: +4.4% year-on-year). Meanwhile, fixed investment declined for the fourth successive quarter, likely owing to tighter financing conditions and poor absorption of EU-linked structural funds. That said, the fall was softer compared to the third quarter (Q4: -3.2% yoy; Q3: -3.9% yoy). Lastly, government expenditures decelerated notably in Q4, up a mild 0.8% year-on-year (Q3: +6.7% yoy).

External sector metrics deteriorated in Q4 on a sharper rise in imports. Exports of goods and services rose 4.4% year-on-year, accelerating from the 2.7% expansion registered in Q3 and showing resilience amid the wider activity slowdown in the EU. However, imports accelerated at an even faster pace against the backdrop of solid domestic demand, particularly household spending (Q4: +9.0% yoy; Q3: +6.8% yoy). All told, the external sector was therefore a greater drag on growth than in Q3.

On a quarter-on-quarter basis, GDP growth adjusted for seasonal effects came in at 0.9% in Q4, weakening from Q3’s 1.4% print.

The economy is expected to shift into a lower gear this year, mainly due to slowing private consumption in the face of moderating wage increases and employment growth. Meanwhile, fixed investment is seen rebounding but gains could be weighed by weak economic sentiment. Furthermore, the country’s rising twin deficits pose key downside risks to the outlook.

Romania GDP Forecast

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