Romania: Growth moderates in Q2 but remains strong nonetheless
September 6, 2019
GDP grew 4.4% year-on-year in the second quarter (Q1: +5.0% year-on-year), according to a comprehensive estimate released by Romania’s Statistical Institute on 6 September. Domestic demand cooled but remained upbeat nonetheless, while the external sector dragged on growth albeit less severely.
Domestic demand remained firmly in the driver’s seat, although lost stride compared to Q1. Household spending expanded a robust 5.3% year-on-year, amid a tightening labor market; however, it was still down from Q1’s 7.0% increase amid intensifying inflationary pressures. Government spending, for its part, picked up (Q2: +1.6% yoy; Q1: +0.1% yoy). Notably, fixed investment growth surged in the second quarter of the year on what appeared to be the improved absorption of EU-linked structural funds; fixed capital outlays soared to 18.0% (Q1: +3.9% yoy).
Export growth, meanwhile, slowed to 0.5% year-on-year (Q1: +3.6% yoy) on shakier demand from the Eurozone, and softening domestic demand weighed on import growth (Q2: +3.6% yoy; Q1: +10.2% yoy). Taken together, net exports continued to subtract from overall growth, although less severely than in the first quarter.
On a seasonally-adjusted basis, output grew 1.0% quarter-on-quarter (Q1: +1.2% quarter-on-quarter s.a.).
Growth is expected to remain healthy as a tight labor market fuels consumption, and thanks to improved private-sector and EU-led investment. That said, slowing exports against a backdrop of subdued external demand will restrain momentum. The precarious fiscal position is a key risk to prospects ahead.