Romania: Economic growth jumps in Q3 on buoyant consumer spending and fixed investment
December 5, 2017
A second estimate released on 5 December by the Statistical Institute (INSSE) confirmed the economy expanded a remarkable 8.8% over the same period last year in Q3, its best GDP performance since Q3 2008 (Q2: +6.1% year-on-year).
The rapid growth was again driven by surging consumer spending; private consumption grew an impressive 13.3% year-on-year (Q2: +7.7% yoy). Household spending continued to benefit from public-sector wage hikes, contained oil prices and VAT cuts. Moreover, fixed investment jumped from Q2’s subdued 0.2% rise to 8.8% growth in Q3, thanks to a step-up in equipment purchases, even as the absorption of EU structural and investment funds remained modest. Lastly, government consumption grew 2.4% in annual terms (Q2: -2.5% yoy).
On the external side of the economy, exports rose 8.1%, accelerating from Q2’s 7.7% expansion. Imports decelerated slightly, from 12.5% in Q2 to 10.9% in Q3. The overall net contribution to growth was minus 5.4 percentage points in Q3 (Q2: -5.6 percentage points).
On a quarter-on-quarter basis, GDP growth adjusted for seasonal effects slowed to 2.6% in Q3, up from Q2’s reading of 2.0% and the highest figure in nearly 10 years.
Romania’s economy is likely to have grown at the fastest pace among EU countries in 2017, as it benefited from expansionary fiscal policies and buoyant private consumption. Nevertheless, some imbalances could be building, as a sizeable budget balance reduces the fiscal room to counter potential economic shocks. However, the economy should post another year of robust, albeit slower, growth in 2018, boosted by accommodative monetary policy, rapid wage growth and rising EU funds inflows.