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A new tiger? Romania hits 5.2 per cent growth in last quarter
Feb 14, 2014 6:03pm by Andrew MacDowall
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Five per cent GDP growth is these days more associated with the fittest Asian and African emerging economies than the sluggish EU fringe, but Romania has sprung a surprise with its Q4 2013 figures, its best for five years. A flash estimate from Bucharests National Institute of Statistics on February 14 suggests that the economy grew by 5.2 per cent year-on-year in the final quarter of last year. This takes its full-year rate to 3.5 per cent, among the fastest in Europe and appreciably above a recent IMF forecast of 2.8 per cent. Meanwhile inflation, once a serious concern, fell to an all-time low of 1.1 per cent in January. A research note by BCR, Romanias biggest bank, said in a research note that external demand (exports of goods and services) most likely remained the main growth driver in 4Q, as in all of 2013. A strong harvest is also likely to have been a factor Romanias growth rate has historically been susceptible to agricultural fluctuations. But BCR added that domestic demand seemed to make a positive contribution to growth, after several quarters of sluggishness indeed, it has been subdued almost constantly since the crisis hit Romanias once-booming economy in 2009. Nonetheless, it is a little early to be celebrating; consumer confidence is still treading water. While growth surged, economic sentiment fell to a nine-month low in January. Indeed, the GDP spike in Q4 is likely to be followed by a gentle slowdown this year, and the recovery remains fragile, as BCR points out: We see the local economy easing its growth to around 2.3% in 2014, as more

evidence is needed in terms of the domestic demand recovery (monthly sentiment indicators are pretty soft). Industry and exports will continue to underpin the economic advance, but agriculture may come up short of last years benchmark, as it still displays highly erratic behaviour from one year to the next. Presidential and European elections later this year may also cause a degree of market wariness. With these factors in mind, the central bank is expected to stop its recent enthusiastic easing cycle. While it is rather too soon to hail an Eastern European tiger, Romanias performance gives grounds for optimism. Investor appetite for a $2bn Romanian bond issue in January five-times oversubscribed reflects broader enthusiasm for the recent flood of Central and Eastern European issues before the Feds taper kicks in. But it also shows a degree of confidence in Romanias fiscal consolidation, not that many years after the country faced a budgetary crisis.
Tags: GDP, manufacturing, Romania economy Posted in Europe, Romania | Permalink Share Clip Print Email