Romania’s GDP expressed in comparable prices picked up by 1.2% q/q (seasonally and calendar adjusted terms) and by 2.4% y/y (not adjusted data) in Q2, to EUR 89.5 billion, the statistics office INS announced on September 5, confirming the flash data issued on August 14. The GDP in the rolling four quarters hit EUR 365 billion.
The economic growth rate strengthened after several consecutive weak quarters, from 0.1% q/q and 0.5% y/y in Q1. This resulted in a 1.5% y/y growth (1.4% y/y adjusted for workdays) for the first half of the year, which is nearly double the 0.8% y/y economic growth last year.
However, the nature of the recovery and the sudden withdrawal of fiscal subsidy call for reserved expectations in the second part of the year and 2026.
The largest part of the 2.4% y/y annual growth in Q2, 1.3 percentage points (pp), was driven by the taxation (taxes on products less subsidies), while the gross value added, shared between employees and companies as wages and profits, advanced by only 1.1% y/y, contributing 1pp to the overall growth.
The gross value added (GVA) increased by 0.8% y/y in H1.
The largest contribution to the GDP growth from among the economic sectors was made by the sector of construction: +11.7% y/y and a contribution of 0.6pp. Services to households (+1.8% y/y) and the public services (administration, education, health, +1.5% y/y) contributed 0.2pp each.
The net taxes and subsidies on products, which rose by 15.9% y/y in Q2 and 8.6% y/y in H1, contributed more than half of the 2.4% y/y growth in Q2 (1.3 percentage points, pp). This may be attributed to either more taxes on products collected by the state from companies or fewer subsidies paid by the state to companies. In Q2, data indicate positive contributions on both sides.
The domestic demand for consumption and investments increased by 2.1% y/y in Q2 (+2.4% y/y in Q1), mainly on the investments component, while the consumption increased by only 0.9% y/y (+1.9% y/y in Q1) and contributed 0.7pp to the overall advance of domestic demand. Further moderation on both elements of the domestic demand is expected for the coming quarters.
The net imports accounted for 5.5% of the domestic demand, a share that was smaller compared to those seen in the previous four quarters but remains significant, posing threats to the country’s external balance.
Forecast: The second half of the year is clouded by the fiscal consolidation and high base effects, and the annual growth rate will be dragged down by more modest performance in Q3 and Q4. The full-year growth will predictably decline from 1.5% y/y in H1 to closer to 1%. Erste Research maintained its forecast for 1.3% which seems slightly on the optimistic side. Still, the 0.3% forecast issued by ING Romania following the August 14 flash Q2 GDP data is certainly on the pessimistic side.
iulian@romania-insider.com
(Photo source: Antonyesse/Dreamstime.com)
Leave a Reply