Romania buildings

Romania GDP Q3 2019

Romania: Growth slumps to over five-year low in Q3

GDP grew 3.0% year-on-year in the third quarter (Q2: +4.4% year-on-year), marking the weakest acceleration since Q2 2014, according to a comprehensive estimate released by Romania’s Statistical Institute on 5 December. Consumer spending cooled but remained solid nonetheless, while the external sector dragged more heavily on growth.

Household spending expanded a robust 4.2% year-on-year, amid a tight labor market and strong wage growth; however, it was still down from Q2’s 5.1% increase and the weakest reading in five years, amid sustained inflationary pressures. Moreover, government spending also softened (Q3: +5.8% yoy; Q2: +9.0% yoy). On the other hand, fixed investment growth surged in the third quarter of the year, likely thanks to an improved absorption of EU-linked structural funds, with fixed capital outlays soaring to 23.9% (Q2: +18.9% yoy).

Export growth, meanwhile, picked up pace (Q3: +3.7% yoy; Q2: +3.0% yoy), despite feeble demand from the Eurozone. Furthermore, soaring investment activity translated into stronger import growth (Q3: +7.5% yoy; Q2: +5.1% yoy). Taken together, net exports continued to subtract from overall growth, and did so at a sharper pace than in the previous quarter.

On a seasonally-adjusted basis, output grew 0.6% quarter-on-quarter (Q2: +0.8% quarter-on-quarter s.a.), marking the softest print in one year and a half.

The economy is expected to weaken further next year. Household spending should lose steam on softer wage growth, while fixed investment is seen slowing due to lingering trade tensions. Moreover, the country’s sizable twin deficits and further political instability prior to next year’s general elections remain downside risks to the outlook.

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