Romania’s GDP growth jumps to above-expected 8.8% y/y in Q3

Romania’s GDP increased by 8.8% y/y in Q3, accelerating from 6.1% y/y in the previous quarter, according to the flash estimate of the stat office published today. The economic growth continued accelerating and reached the highest level since Q3 2008, notably above market expectations. In seasonally-adjusted terms, the GDP increase was slightly lower, at 8.6% y/y, but also on a strong acceleration trend. In quarterly terms, the economy grew by 2.6% q/q, speeding from 2.0% q/q a quarter earlier (the seasonally adjusted GDP prints were revised).

The GDP rise in Q3 was most probably mostly fuelled by the still robust domestic consumption. However, the industrial prints have indicated improvements too, so we think that the industry might have also had a visible contribution to the economic growth in the period. Another rising contribution to growth most likely came from the agriculture, as the officials announced better harvests than last year. The exports also performed well in Q3, while imports started slowing down. Hence, the net exports probably reduced the negative contribution to the GDP rise. On the other hand, the construction sector and the investments were most likely the major negative drivers, especially after the government slashed again the public investments at the budget revision.

Overall, the economic growth most probably remained mostly backed by consumption because of the tax cuts and wage increases adopted by the state since 2015 that continued this year as well. Net exports must have had a milder negative contribution to the GDP increase in the period, as industrial exports remained on a moderate upward trend, backed by improvements in Romania’s major trading partners in Europe. The gross fixed capital formation contribution to the GDP increase would most likely continue to deteriorate, raising worries on the economic growth sustainability.

The government expects the economy to advance by 6.1% in 2017, after revising the estimation twice this year. The central bank and most of the IFIs also changed their GDP growth forecasts on Romania upwards, grounded on the domestic demand developments.

The statistical office will publish the first preliminary report on GDP developments in Q2, with breakdown by components contribution, on Dec 5, according to the institution’s calendar.

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