10 decembrie, 2018

The economic growth on the first three quarters of 2018 was 4.2%, both in gross series and the seasonally adjusted series, according to data published by the INS in the first provisional version, which confirms the signal data.

Beyond an evolution below the initial expectation of 5.5%, we can see a slight decline in the GDP growth in the third quarter, although, paradoxically, we recorded the largest increase over the previous quarter.

The explanation is the unfavourable net effect, as we saw a record GDP growth of 8.8% in the reference quarter, Q3 2017, compared to Q3 2016.

Quarterly GDP in first nine months of 2017 (seasonally adjusted data)
Period Q1 Q2 Q3 nine months 2018
GDP
% compared to the same period of 2017

Unfortunately, the same base effect less favourable than in the first half of the year will also occur in the last quarter, which makes it difficult to reach the level of 4.5% considered as the revised 2018 GDP growth (a result of 5.3% on Q4 2018 would be needed).

Evolution of quarterly GDP compared to the previous quarter (%, seasonally adjusted series)
Quarter
Evolution of quarterly GDP compared to the corresponding period of the previous year
Quarter

By category of resources, manufacturing industry contributed the most to GDP formation in the first nine months of 2018, with 23.6% of the total and 1.1 percentage points of the gross growth of 4.2%.

Substantial proportions were contributed by agriculture (a 5.5% contribution to GDP but a surprisingly good 0.6pp contribution to the economic growth, which shows the relatively good agricultural year) and trade (a 18.4% contribution to the 9-month GDP formation and also a 0.6pp effect on GDP, but attention, down to only 15.8% on Q3 2018)

Substantial contributions were brought by professional, scientific and technical activities (6.6% in 9 months, with an increased rhythm to 7.2% in Q3 2018) and the IT&C sector (5.3%, but with a loss in speed to +4.8% in Q3 2018), both with a contribution of 0.3 percentage points of the GDP growth of 4.2 percentage points.

Real estate transactions and public administration, education, health, defence, etc. also added 0.2 percentage points to the economic result, domains where the calculation methodology is mainly related to the salaries paid in order to assess the gross value added in the economy.

It is noteworthy the zero effect of a key sector, the financial intermediation and insurance industry, as well as the only negative value in this picture, from the construction sector (-0.2% in 9 months and a worrying -0.4% in Q3 2018).

A brief picture of Romanian economy’s achievements

We present below the brief picture of Romanian economy’s achievements, where the advance is robust in terms of volume but a little too high in terms of prices (+ 6.8% on the total gross value added), which significantly reduces the nominal value of the amounts accounted for the volume advancement. Hence the direct cause of GDP growth in real terms below those initially projected.

We can see that the domains with the best performance were agriculture and IT (which also recorded the lowest price increase index, except for real estate transactions) followed by professional and industrial activities.

On the opposite side, besides the relatively weak or even negative evolution in volumes, public administration, education, health, etc. and constructions also registered very high price indices that affected the overall economic outcome. The same thing, to a slightly lesser extent, can also be said about the financial intermediation and insurance sector, otherwise on a rise marked by profitability.

GDP by resource categories in the first three quarters of 2018 – gross series
Sector Results Volume evolution Price change
Manufacturing
Trade, transport, auto repairs, hotels, etc.
Public administration, education, health, etc.
Real estate transactions
Professional activities, support activities, etc.
IT&C
Agriculture, forestry, fishery
Construction
Financial intermediations and insurance
Entertainment, home repairs, other services
Gross added value
Net taxes on products
GDP

It should be emphasised the double-digit increase in net taxes, although prices have advanced here with only a little more than one percentage points. They reached thus a share in the structure of GDP growth a little bit higher than the practice. Structured after the first nine months of the year on a ratio of only 76% gross value added (3.2pp) to 24% net taxes (1pp), in order to result in the GDP growth of 4.3%.

Last, but not least, the negative balance between exports and imports of goods and services should be emphasized. A balance that increased to over RON 17 billion (exports of RON 292.2 billion and imports of RON 309.5 billion). Not only did the growth rate of exports (+ 5.9%) fall below imports (+ 9.1%), but also the price index was higher, +4.8% in exports and +4.1% in imports.

The result of this mix: an effect of -1.5 percentage points on GDP growth. In other words, we would have achieved the planned economic growth plan if we had had the capacity to cover an increased domestic demand and the competitiveness with our main foreign trade partners which to reduce, not increase the foreign deficit.