Romania’s GDP advanced by 1.8% q/q in the second quarter of the year, marking a 13% annual advance compared to the same period of 2020 — the ‘lockdown quarter’ — and in seasonally adjusted terms it is 1.4% above the pre-crisis peak (Q1, 2020) according to the first round of detailed Q1 GDP data released by Romania’s statistics office INS.

In absolute terms, Romania’s Q2 GDP reached RON268.8bn (€54.5bn). Over the past four quarters, the country’s GDP was RON1.1 trillion. 

The low-base driven double-digit growth comes after four consecutive quarters of negative annual growth rates, prompted by the COVID crisis.

The economic recovery measured by the quarterly growth rate slowed down to +1.8% q/q in Q2, from 2.5% q/q in Q1 and 4%-5% q/q in the second half of last year.

This year’s 7% growth rate estimated by the state forecasting body equates to 1.7% quarterly growth, and the 5% annual advance seen for the coming years accounts for 1.2% quarterly growth.

In annual terms, the services sector boasted the strongest growth (+20.6% y/y) followed by industry (+18.8% y/y) and IT&C (+17.1% y/y) while the agriculture and the financial services sectors performed worse (negative growth rate) than last year.

On the utilisation side, the domestic consumption rose by 8.1% y/y while the gross fix capital formation (investments) soared by 12% y/y.

Given the very different sizes (in favour of consumption), however, consumption made a contribution to the overall growth that was more than twice the contribution made by investments (6.1pp versus 2.5pp).

Both exports and imports advanced by as much as 40% y/y in Q2 as foreign trade resumed after lockdown, but this does not bode well for the country’s trade balance.

The external deficit adds to the wide public deficit prompted by fiscal stimulus and structural issues, creating a risky combination.

While the annual GDP growth rate may be misleading, the growth rates over the past 24 months show better where Romania’s economy has reached after last year’s shock.

Thus, the country’s total GDP in Q2 was 1.6% up (versus Q2, 2019), compared to +2.2% in Q1 and +2.8% in Q4 (calculated on comparable basis).

The performance was highly uneven among sectors: IT&C posted a 30% advance while the entertainment industry showed a 35% contraction.

Industry lags 5.4% versus the level reached two years ago — but it was not doing well before the crisis (-5.6% in similar terms in Q1 2020).

The construction sector has advanced by 10% over the past two years.

On the utilisation side, total consumption in Q2 still lags 3.2% behind the level reached two years ago, while the gross fixed capital formation advanced by 14.5%.

In terms of external balance, the situation has worsened as exports advanced by only 0.5% (over the two-year span) while imports surged by 8.7%.

Romania GDP; 24-month change	Q1 20	Q2 20	Q3 20	Q4 20	Q1 21	Q2 21
Total gross value added	8.9%	-6.0%	-3.3%	4.0%	5.3%	3.4%
Agriculture, forestry and fishing	-4.1%	-13.7%	-30.3%	8.5%	2.3%	-14.6%
Industry	-5.6%	-21.1%	-10.0%	-3.0%	-4.1%	-5.4%
Construction	15.1%	19.1%	21.0%	16.3%	24.8%	10.4%
Services to households	10.0%	-11.2%	-4.4%	-1.0%	5.1%	4.1%
IT&C	38.6%	31.3%	24.6%	23.7%	26.7%	30.3%
Financial intermediation and insurance	-4.1%	-5.8%	-4.7%	-5.7%	-2.6%	-2.5%
Real estate activities	12.8%	9.4%	12.6%	14.4%	1.2%	2.4%
B2B services	23.6%	-0.5%	5.7%	3.2%	1.6%	5.5%
Public services	5.7%	7.0%	6.5%	3.3%	1.5%	3.4%
Culture and entertainment	2.3%	-43.7%	-19.2%	-18.8%	-18.8%	-34.6%
Net taxes	3.9%	-13.3%	-4.2%	-2.1%	-2.9%	1.7%
Gross Domestic Product	7.5%	-6.0%	-2.8%	2.8%	2.2%	1.6%
Final consumption	9.3%	-8.1%	-1.9%	0.6%	4.5%	-3.2%
Actual individual consumption of households	9.2%	-9.0%	-2.0%	-0.7%	4.4%	-3.4%
Gross fixed capital formation	18.9%	19.0%	26.4%	16.9%	31.1%	14.9%
External balance of goods and services
Exports of goods and services	1.6%	-26.8%	-1.9%	4.3%	-0.7%	0.5%
Exports of goods	-0.5%	-30.7%	-0.5%	6.8%	0.3%	2.7%
Exports of services	13.3%	-15.5%	-6.8%	-2.4%	-6.3%	-5.4%
Imports of goods and services	13.0%	-19.0%	3.5%	8.6%	6.5%	8.7%
Imports of goods	11.8%	-18.0%	8.0%	11.6%	12.2%	11.7%
Imports of services	17.1%	-24.2%	-16.7%	-5.9%	-10.9%	-5.5%
Source: INS, Intellinews BNE