Romania GDP growth

Romania’s GDP growth rate below EU average in Q2

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Romania’s GDP growth was below the EU average in the second quarter (Q2) of this year, data released by Eurostat showed on Tuesday (Sept. 7). The Southeastern country’s gross domestic product increased by 1.8% in April-June period compared with the previous quarter, the statistical office of the European Union said.

Ireland (+6.3%) recorded the sharpest increase of GDP compared to the previous quarter, followed by Portugal (+4.9%), Latvia (+4.4%) and Estonia (+4.3%). Declines were observed in Malta (-0.5%) and Croatia (-0.2%). Meanwhile, eurozone’s GDP was up by 2.2% and the EU’s up by 2.1%

Romania’s National Institute of Statistics (INS) also released a statement on Tuesday, confirming that –
the GDP– seasonally adjusted data – estimated for Q2 2021 amounted to 288904.0 million lei current prices, increasing – in real terms – by 1.8% against Q1 2021.Compared to the second quarter of last year, the GDP grew by 13%. This was the first time expansion in the GDP, since Q1 2020 and the fastest pace since the series began in 1996, amid easing the lockdown measures and a low base effect
last year.

The government expenditure rebounded sharply (7.8% vs -1.8% in Q1), while household consumption expanded faster (10.1% vs 0.8%) and fixed investment grew faster (12.0% vs 11.7%). However, net external demand contributed negatively to the GDP, as exports expanded by 40.3 percent (vs -0.2% in Q1) while imports rose at a faster 40.4 percent (vs 4.7% in Q1).

Romania’s GDP estimated for the first half of 2021 amounted to 493843.2 million lei current prices, increasing – in real terms – by 6.5% as against the first half of 2020, INS also said.

Romania GDP
(Source: INS)

Resources

Almost all industries contributed to the GDP increase in the first semester of 2021 as against the same period of 2020, more significant positive contributions being recorded for the following industries: – Industry (+1.9%), with a share of 19.2% in GDP, whose activity volume increased by 10.4%; – Wholesale and retail; motor-vehicles and motorcycles repair; transport and storage; hotels and restaurants (+2.0%), with a share of 20.3% in GDP, whose activity volume increased by 10.2%; – Information and communication (+1.1%), with a share of 7.9% in GDP, whose activity volume increased by 14.1%. Net taxes on products, with a share of 10.3% in GDP, contributed with +0.9% to the GDP growth rate, their volume increasing by 10.2 %.

Uses

From GDP uses standpoint, the increase was mainly due to: – final consumption expenditure of households whose volume increased by 5.4% contributing by +3.4% to the GDP growth rate; – gross fixed capital formation whose volume increased by 11.9% contributing by +2.6% to the GDP growth rate. The net export recorded a negative contribution to the GDP growth rate (-2.3%) being influenced by the volume increase of exports of goods and services, by 16.8%, in correlation with a higher increase of the volume of imports of goods and service, by 20.0%.

Political turmoil 

Fitch warned that political crisis puts fiscal consolidation at risk in Romania. In a note published on Tuesday (Sept. 7) the rating agency said the collapse of Romania’s coalition government could disrupt fiscal consolidation efforts, which are key to resolving the Negative Outlook on Romania’s ‘BBB-’ rating.

Tensions between the PNL and USR-Plus, two centre-right parties in the coalition that took office in late 2020, have risen in recent weeks over policy priorities. USR-Plus announced on Sept.7 that they were leaving the coalition alliance, following the dismissal of USR-Plus MP Stelian Ion as Justice Minister Sept. 2 This leaves the government without a parliament majority.

Fitch’s next scheduled review of Romania’s rating is due on October 22.