Romania’s economy advanced by 1.1% y/y in the last quarter of 2023 (chart) and edged down by 0.5% q/q in seasonally adjusted terms, Romania’s statistics office INS announced on March 8, revising slightly upwards the annual increase from 1.0% announced in the flash estimate.

In 2023, the country’s GDP increased by 2.1% y/y, compared to +2.0% y/y in the flash estimate.

Speaking of the 2.1% y/y GDP growth in 2023, the construction sector increased by 11% y/y (in gross value-added terms) and contributed 0.8 percentage points (pp) – the largest single individual contribution of a sector. The IT&C sector advanced by 5.1% y/y and contributed another 0.3pp. Agriculture added another 0.4pp thanks to its 10.2% y/y advance. Industry made a negative 0.5pp contribution, due to its 2.3% y/y contraction in value added terms.

On the utilisation (demand) side, the consumption advanced by 2.9% y/y whereas the gross fixed capital formation by 12% y/y. Their overall contributions to the GDP growth were not that different, though: 2.3pp and 2.9pp respectively. Domestic demand thus surged more than the GDP creation – with the difference being provided not by the foreign trade elements (more resources from abroad) but by the decrease in inventory. Foreign trade had a neutral contribution (+0pp) to the GDP growth in 2023.

As well as revising upward the Q4 and full year 2023 growth from the flash estimate, the INS also altered the seasonal q/q profile. 

The statistics office clarified its methodology and published the full set of data behind it but its press release remains slightly misleading: it still points to the 3.0% y/y GDP advance in Q4 calculated under the old methodology instead of 1.1% y/y under the new methodology. 

The new methodology is based on the chain-linked volume technique (with the reference year 2020) while the old methodology use fixed-base indices (with the base year 2020, currently). The difference between the two methodologies is that the old one uses the structure of the economy as of the base year (2020) to calculate GDP changes starting from the change of its smaller segments – while the new methodology is constantly updating (on an annual basis) the structure of the economy. The IMF recommended the new methodology used by INS and the migration initiated by the Romanian statistics office is an improvement, although it prompted some confusion among analysts in February after the transition was insufficiently prepared during the holiday season.

“Chaining also avoids the need for re-weighting price and volume series when the base year is updated every five or ten years, which usually generates large revisions in the history of price and volume developments,” the IMF said.