Romania reports stunning 8.8% GDP growth in Q3

Romania reports stunning 8.8% GDP growth in Q3
By Iulian Ernst in Bucharest November 14, 2017

Romania’s GDP increased by 8.8% y/y in Q3, the statistics office said in a flash estimate issued on November 14. In January-September, the annual growth rate was 7.0% y/y. 

The full-year figure might exceed the 6.1% projection from the state forecasting body CNP, particularly as public spending tends to be concentrated in Q4 with an impact on total demand, but the magnitude of the corrections next year will be proportional. 

The local currency is under pressure for depreciation, inflation and interest rates are rising and the government has toned down plans for wage hikes in the public sector. A deterioration in consumer confidence is likely to occur as interest rates, the exchange rate and inflation hurt households' disposable incomes, and would be accelerated by political turmoil.

The seasonally-adjusted GDP advanced by 2.6% q/q in Q3, after a 2.0% q/q advance in each of the previous two quarters, the statistics office said.

Details related to the formation or utilisation of the GDP are not provided along with the flash estimate. However, the main growth driver in Q3 most likely remained the services sector (in terms of GDP formation), fuelled by the robust domestic demand for consumption. As a benchmark, retail sales returned to double-digit growth (+13.4% y/y) in Q3, after they eased in the previous three consecutive quarters.

Industry performed well overall, but not as strongly as in Q1 and Q2 in terms of gross industrial output, while energy price dynamics do not suggest better performance in terms of value added. Industrial output advanced by 7.0% y/y in Q3, after rising 8.6% y/y in Q2 and 7.5% y/y in Q1. The construction sector remains depressed by subdued public investments, despite robust demand in the residential segment. The construction works index dropped by 5.5% y/y in Q3, which is an improvement indeed after the 12.2% y/y plunge in Q2.