Romania: Economy closes 2019 on strong note
March 10, 2020
Annual GDP growth accelerated to 4.3% in the fourth quarter of last year from 3.0% in the third quarter which had marked the weakest expansion in over five years, according to a comprehensive estimate released by Romania’s Statistical Institute on 10 March. On a seasonally-adjusted basis, output jumped 1.5% quarter-on-quarter (Q3: +0.6% quarter-on-quarter seasonally-adjusted), marking the strongest upturn since Q3 2018. Full-year growth came in at a four-year low of 4.1%, however, down from 4.4% in 2018.
Sturdier domestic demand led the fourth-quarter pick-up. Household spending expanded at the quickest pace in a year, surging 7.2% annually (Q3: +4.3% year-on-year) on the back of a tight job market and robust wage growth. Moreover, public expenditure soared 14.4% year-on-year, likely due to the government settling overdue payments, marking an over one-decade high (Q3: +2.8% yoy). Lastly, although capital spending moderated, it remained robust amid continued absorption of EU-linked structural funds (Q4: +15.2% yoy; Q3: +25.6% yoy).
Export growth, meanwhile, eased marginally (Q4: +3.1% yoy; Q3: +3.2% yoy) amid subdued demand from the Eurozone. Similarly, imports lost traction but held solid nonetheless owing to upbeat demand at home (Q4: +6.2% yoy; Q3: +9.1% yoy). Taken together, net trade continued to subtract from overall growth but less so than it did in the previous quarter.
Although the economy is expected to slow this year, robust consumer spending—propped up by a tight job market—should underpin a healthy pace of expansion. Continued absorption of EU structural funds should also support investment activity. That said, political uncertainty and the country’s sizeable twin deficits pose key risks to the outlook.
Author: Javier Colato, Economist