Romania revises Q3 GDP growth slightly upward to 4.4%

Romania revises Q3 GDP growth slightly upward to 4.4%
By Iulian Ernst in Bucharest January 14, 2019

Romania’s statistics office revised the annual GDP growth for the third quarter of the year slightly upward to 4.3%. It also revised upward the Q1-Q3 growth rate to 4.3% y/y (from 4.2%) and the period’s nominal GDP by 0.23% to RON701bn (€143bn). The rolling four-quarter GDP at the end of September was RON924bn.

More production of value added in the services sector (for households and firms as well) and gross imports slightly stronger than initially estimated, were balanced by larger advance of the public consumption (+10.7% revised from +1.5%), in the revision. The share of domestic demand supplied from import (net imports as a percentage of domestic demand) keeps rising, to 2.7% over the past four quarters from a minimum of 0.1% calculated in Q1 2016.

The revision has not altered the big picture: the variation of inventory contributed a significant 3.1 pp (revised downward from 3.3 pp) to the overall 4.4% annual GDP growth in Q3. The contribution eased from 3.7 pp in Q2, but it remains high for the third quarter in a row, heralding that the inventory cycle will soon make a negative contribution (even if of a smaller magnitude), most likely during 2019.

The largest contribution to growth, on the utilisation side, was made by the net final consumption of households: 2.8%pp, albeit significantly down from the peak value of 8.1 pp in Q3 2017. Net imports were 2.9% of the domestic demand (consumption, capital formation) in Q3, up from 1.5% one year earlier. Over the past four quarters, the share of net imports was 2.7% of domestic demand.The share has been rising over the past six years, but is far from the double digit values before the 2008-2009 recession.

The revision published by the statistics office on January 11 also upped the GDP annual deflator to 7%, up from 6.3%. For the January-September period, the deflator was revised from 6.2% to 6.5%. This is likely to marginally improve the budget deficit and Current Account ratios (to GDP).

A detail raises some question marks: the industrial price inflation was less than 5% in January-September and less than 6% in Q3, while the consumer price inflation has been even lower.