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Romania GDP Q4 2017

Romania: Economy decelerates in Q4, but remains buoyant

A third estimate released on 5 April by the Statistical Institute (INSSE) showed the economy expanded 6.7% over the same period in the previous year in the fourth quarter of 2017, down 0.2 percentage points from the second estimate released in March and below the third quarter’s multi-year high of 8.8%. The economy was again supported by buoyant domestic demand, while the external sector continued to drag on growth. Q4’s reading brought full-year growth for 2017 to 6.9%, the strongest pace of expansion in nine years.

The solid fourth-quarter result came on the back of buoyant household spending. Private consumption increased a significant 12.3% year-on-year (Q3: +12.4% year-on-year), benefitting from an expansionary fiscal stance, strongly rising wages and tightening labor market conditions. Moreover, growth in fixed investment gained steam, increasing 11.0% from Q3’s already robust 6.2%, likely boosted by rising inflows of EU investment funds, and the car assembly and machinery industries. Lastly, government consumption dropped 3.1% in annual terms (Q3: +15.5% yoy).

Exports rose 8.8% on the back of solid overseas demand for transport equipment, slightly up from Q3’s 8.6% expansion. Imports, driven by rising domestic demand, expanded 11.9% in Q4 (Q3: +11.1% yoy). Consequently, the external sector continued to drag on growth.

On a quarter-on-quarter basis, GDP growth adjusted for seasonal effects slowed to 0.5% in Q4, considerably down from Q3’s reading of 2.4%.

Romania’s economy grew at the fastest pace among EU countries in 2017, spurred by expansionary fiscal policies and soaring private consumption. However, the pro-cyclical fiscal stance and sizeable budget deficit risk overheating the economy and pose stability risks in case of unexpected shocks. That said, the economy should post another year of robust, albeit decelerating, growth in 2018, underpinned by favorable financing conditions, robust wage growth and rising EU funds inflows.

Romania GDP Forecast

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