The National Institute of Statistics (INS) confirmed the last year’s economic growth at 4.8%, the first preliminary version published after the initial forecast announced as a signal.
(We remind that the second preliminary version is to be announced after about a month and the semi-final version after one year, while the data will remain „set in stone” only after two years, in their final form).
The seasonally adjusted result for the fourth quarter was 1.3% compared to the previous quarter, which seems to be the best value in the last three years.
If we analyse, though, the progress between July-September, much lower than in 2014 and 2015 (less than one third), we can see that the favourable base effect boosted performance in the last quarter of last year (see table below).
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- Quarterly GDP evolution compared to the previous quarter
- (%, seasonally adjusted series) – updated version (preliminary data – 1-)
- Quarter
- Source: INS
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In terms of unadjusted series, we can notice an evolution in the last quarter of 2016 very close to the annual average.
The peak of + 6% in the second quarter compared to the same quarter of the previous year remained isolated, but it should be noted the dependence between the increasing performance from year to year in this segment of time and the final level recorded at the end of the year.
Compared to the reference year 2008, Romania’s GDP rose by slightly more than 10% and returned to a little more than one percent above the peak registered in 2008. Basically, only six years after the economic crisis we recovered from the decrease and we have been following again a growth trend only for three years.
With only 10.5% in eight years, we should be more cautious in terms of growth of people’s real incomes. Especially that we have already counted six years of growth and the economic increase-decrease cycles are a relentless reality in capitalism. Basically, once some substantial benefits are granted based on a presumptive future growth, they can no longer be withdrawn and the budget will not sustain the deficits created unless some exchange rate adjustments take place (see the adjustment from 3.33 lei/euro in 2007 to 3.68 lei/euro in 2008 and 4.23 lei/euro in 2009).
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- Year
- GDP growth (%)
- GDP level (2008=100%)
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In absolute figures, GDP was 759,227.6 million lei in 2016, slightly above 758.500 million lei, the amount considered as the reference by the Ministry of Finance during the year and used in calculating the deficits of the state budget and the consolidated general budget. Noteworthy is the widening gap between the quarterly results, more visible by associated weights.
The first quarter was significantly below 20% of the end result, while the fourth quarter rose towards 30%. Which suggests us, again, caution for 2017 when we shall find out the first results for the quarterly GDP, less important for the envisaged end result and essential to the sustainability of the wage and pension increases already announced.
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- Quarterly GDP in 2016 – unadjusted series
- 1st quarter
- GDP (million lei)
- Share (%)
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Bubble economy: industry and agriculture – ranking last in terms of growth
In terms of contributions to the GDP growth, the „lion’s share” went to the trade sector – 1.8%, followed by IT&C (+ 0.7%), support service activities (+ 0.6%) and net taxes on product (+ 0.5%).
The industry ranks only fifth, construction barely contributed one tenth of a percent and agriculture was at zero level.
This structure of the economic sectors shows that the robust economic growth that placed us at the forefront of the EU states was based on almost nothing tangible. That’s precisely why questions are raised regarding its sustainability in the coming years and, especially, regarding the sensitivity to the external factors that can affect the economy.
Moreover, a hazard warning signal occurred on the display of the categories of uses in the GDP formation and growth, discrete, but very important. The final consumption expenditure of households significantly decreased in the fourth quarter (contribution of only 56.6% of GDP compared to an annual average of 60.9%), and its influence on the end result fell to only 2.4%, compared to the annual average of 4.5%.
In relation to the GDP growth, we can see in fact that in the last quarter of the year the economic growth boost by domestic consumption has declined to only 55% of the total compared to an average of 93% for the whole year (namely almost the entire growth in 2016 was based on boosting the domestic consumption, but, beware, without any coupling with the industry, construction and agriculture).
The evolution of the main economic sectors contributing to GDP compared to the same period of the previous year (volume indices).
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- Economic field Evolution in Q4 Evolution in 2016
- Agriculture
- Industry
- Construction
- Trade
- IT&C
- Financial intermediation and insurance
- Real estate transactions
- Professional activities, services
- Public administration
- Leisure activities, repairs
- Gross added value
- Net tax on products
- GDP
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We can see (highlighted in red) the economic sectors that were weaker in the fourth quarter compared to the annual average. Which does not really bode well for the further evolution in 2017. Seen as a growth only by the Government (which has started to distribute a sort of welfare dividend based on it) and forecasted as a decrease by all international institutions.
The only notable improvement appears in the foreign trade trend with increasing exports and decreasing imports in the fourth quarter compared to the annual average.
Which also indicates the solution of the foreign demand taking over the almost exclusively predominant weight of the increasing domestic consumption, as a growth engine, especially in a context of a better evolution of the European economies that are our main trade partners.
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- Evolution of foreign trade compared to the same period of the previous year (volume indices)
- Foreign trade flow Evolution in Q4 Evolution in 2016
- Goods and services export
- Goods and services import
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Unfortunately, the formation of the gross fixed capital worsened in late 2016 and cancelled the reasonable performance from the previous quarters, although the overall progress of the gross capital formation indicator during the year was better in the fourth quarter.
This would be an element that is likely to curb the economic growth forecast, including for 2017.
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- Evolution of the formation of the gross capital compared to the same period of the last year (volume indices)
- Gross capital formation – of which the gross fixed capital formation
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Altogether, the data presented by the official statistics look well from far, at a quick judgment, but include multiple warnings regarding the quality and sustainability of growth.
Especially for the expectations of an even higher GDP growth in 2017 than in 2016, which is absolutely critical for ensuring the income increases promised and now expected by significant categories of the population.
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