Romania: GDP contracts at more moderate rate in Q3
A second release confirmed that the economy contracted at a milder pace of 6.0% year-on-year in the third quarter, following Q2’s unprecedented 10.3% plunge, as the gradual lifting of Covid-19-related restrictions allowed for the resumption of activity.
Consumer spending dropped at a significantly softer rate of 4.0% year-on-year in Q3, compared to the 13.3% contraction tallied in Q2. Moreover, fixed investment growth picked up to 2.3% in Q3 from 2.2% in Q2. Meanwhile, public spending slid 0.3% (Q2: +4.4% yoy), contracting for the first time since Q2 2018.
On the external front, exports of goods and services dropped 6.7% on an annual basis in Q3, moderating markedly from the second quarter’s 28.5% dive. Similarly, imports of goods and services slid at a notably softer rate of 3.6% in Q3 (Q2: -22.0% yoy).
On a seasonally-adjusted quarter-on-quarter basis, activity bounced back in Q3, with GDP expanding 5.6% and contrasting Q2’s 12.2% contraction.
Looking ahead, GDP is seen rebounding solidly in 2021: On the external side, reviving EU industry—particularly in Germany—should ramp up exports, while recovering household spending and inflows from the EU recovery fund are likely to bolster domestic activity. However, the deteriorating labor market, the country’s strained public finances—which threaten its downgrading to junk status—and the uncertain trajectory of the pandemic pose downside risks.
Commenting on Q3’s GDP outturn and the outlook ahead, Lauren Braniff, economist at Oxford Economics, noted:
“We now forecast a 5.1% contraction in GDP in 2020, worse than -4.6% seen last month, before growth of 3.5% in 2021 as restrictions are eased. The Q3 GDP surge came in weaker than we anticipated, with both domestic and external factors supporting the economic rebound, but GDP remains below pre-crisis levels with the economy only partially recovering after the sharp fall in Q2. Meanwhile, the resurgence in the virus has led the government to introduce a national curfew for the next 30 days.”