Romania: Austerity measures push Romania deeper into recession
December 2, 2010
Gross domestic product (GDP) fell 2.5% over the third quarter last year, according to revised data from 2 December, which confirm the flash estimate released on 12 November. The figure represented a strong deterioration compared to the second quarter's 0.5% drop and marked the seventh consecutive quarter of declining output. The deterioration over the previous quarter mainly reflects a contraction in domestic demand, which declined 2.5% (Q2: +1.9% year-on-year). Private consumption deteriorated to a 1.1% drop over the same period last year (Q2: -0.6% yoy), as the July VAT increase and public payroll reductions curbed consumers' purchasing power. In addition, investment declined 13.7% (Q2: -9.5% yoy). However, the contribution from external sector improved from a 9.9 percentage points detraction to minus 2.2 percentage points, as exports of goods and services expanded 14.6% in the third quarter (Q2: +21.4%) while imports rose 11.9% (Q2: +24.5%). At the sector level, the subdued performance in the third quarter was driven by services, which contracted 4.6% (Q2: -3.2% yoy), thus remaining in negative territory for the seventh consecutive quarter. Meanwhile, agriculture plunged from a 0.7% increase in Q2 to a 7.6% drop, whereas the industrial sector expanded 4.2% (Q2: +5.9% yoy). A quarter-on-quarter comparison corroborates the deterioration shown by the annual figures as GDP contracted 0.7% in seasonally adjusted terms in the third quarter, which contrasted the 0.3% expansion registered in the second quarter.