Romania’s GDP increased 1.8% y/y in H1 driven by higher external demand with net exports contributing 5.3pps to the overall growth, while the internal consumption remained flat on the year and the gross fixed capital formation narrowed, the statistics office reported.

In quarterly terms, the seasonally-adjusted GDP increased by 0.5%, somewhat slower that the 0.6% rise in Q1. The seasonally-adjusted GDP thus marked a third consecutive quarterly growth, setting grounds for a more sustainable upward trend.

The growth will predictably continue in Q3 and Q4 supported by robust grain crops. The expansion driven by exports and agriculture might be seen as circumstantial [non-sustainable], but the two drivers could push up the country’s economic performance in the medium and long term if properly stimulated by public policies.

Exports increased by 10.7% y/y in H1, while imports edged down 0.9pps. The 4.4% decline in gross fixed capital formation contributed a negative 1pps to the annual GDP performance, while the variation of stocks [decrease in stocks] also contributed a significant negative 2.5pps.

The external demand has visibly stimulated the industry, which expanded by 3.9% y/y in terms of gross value added and contributed 1.1pps to the 1.8% y/y annual expansion in H1. The construction sector notably contracted by 3.1% y/y and contributed a negative 0.2pps to the GDP's y/y performance.

Q2 GDP - The external demand-driven growth pattern was even more visible in Q2, when net exports made an impressive 6pps contribution to the 1.5% y/y GDP growth. Exports surged by 12.1% y/y and imports contracted by 1.7% y/y. Net exports’ contribution was partly offset by the 3.6pps negative contribution of the variation of stocks and the 1pps negative contribution of the gross fixed capital formation. The gross value added in the industry strengthened 4.9% y/y, contributing 1.4pps to the 1.5% y/y growth.

The net taxes’ contribution to GDP decreased in line with the disappointing tax collection rate. Net taxes fell by 4.2% y/y in Q2 and by 1.7% y/y in H1. The impact on the GDP growth was significant - 0.6pps in H1 and 0.2pps in Q2.