Romania dodges recession

By bne IntelliNews February 14, 2013

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Romania recorded quarterly GDP growth of 0.2% in the final three months of 2012 to unexpectedly avoid entering a technical recession at the last minute.

After posting a 0.4% decline in the third quarter of the year, the Romanian economy rose a seasonally adjusted 0.2% in the fourth compared with the previous three months. Output grew 0.3% year on year in October-December, the National Statistics Institute in Bucharest said in a flash estimate.

The result surprised analysts, who had forecast a second consecutive quarter of contraction - the yardstick for a technical recession. The median estimate of six economists surveyed by Bloomberg was for a 0.1% quarterly contraction.

Ahead of the first detailed GDP reading, which will be released in early March, analysts say they assume that domestic demand was the main driver of the growth, with destocking likely easing the negative impact it has been exerting. "We also do not completely rule out a marginal positive contribution to GDP formation coming from external demand, bearing in mind that imports fell more quickly than exports in y/y terms," Erste writes in a note.

The news strengthens hopes that Romania's economy will put in a better performance this year than it managed in 2012, with full year growth showing a meager 0.2% - poor harvest and slowing export growth amid Europe's debt crisis were the main drags - although analysts still expect it to struggle to live up to its potential.

"We still see the Romanian economy inching up about 1% in 2013, while trailing behind its potential, now estimated at 1.6%," the Erste analysts predict. "The cabinet's decision to hike public wages and pensions as of January 2013, with perhaps further increases in the second half of the year, could help private consumption get a second wind."

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