Analysts suspect fiscal stimulus pushed Romania's Q1 economic growth above their expectations

The GDP figures released by Romania's statistics office INS on May 15 surpassed the consensus expectations and prompted positive revisions of banks' forecasts for the whole year.

But the analysts still expect a steeper decline in the second quarter of the year (Q2), as reopening the economy depends on the developments in the country's leading trade and economic partners that have faced deep economic contraction, Profit.ro reported.

Romania's economy grew by 2.4% year-on-year in Q1, compared to a median expectation of 1.9% revealed by a Bloomberg survey among economists. The poll showed expectations for negative quarter-on-quarter dynamics (which would have set the grounds for the recession scenario) compared to the 0.3% positive growth announced by the statistics office.

ING Bank Romania economist Valentin Tataru points to the massive public expenditures started last winter as a driver for the above-expectations economic growth. In Q1, the budget deficit reached 1.7% of GDP - the highest level in history (speaking of the first quarter of the year).

"We believe that the domestic economy will feel the strongest pandemic shock in the second quarter. Still, we draw attention to the fact that the probability of avoiding a recession is increasing," wrote Andrei Radulescu, chief economist of Banca Transilvania.

BCR, which expected a GDP contraction of 0.9% in Q1, expects a double-digit decline in Q2 and a double-digit return in the third quarter.

ING has updated its growth forecast with the integration of Q1 GDP flash estimate, so it expects a contraction in GDP of 5.5% in 2020, compared to 6.6% under the previous forecast. BCR has not revised its full-year GDP forecast (-4.7%) as it waits for full Q1 data in June.

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