Romania’s GDP growth eases abruptly to 2.2% in Q4, energy is main suspect

Romania’s annual economic growth has deteriorated more than expected to 2.2% YoY in Q4, from 7.4% YoY in Q3 and 13.9% YoY in Q2, the statistics office INS announced in a flash estimate.

Based on a limited number of short-term series, the flash estimates are typically subject to subsequent revisions that may be quite significant during times of such high volatility.

Q4 GDP figures were disappointing not only compared to the Government’s expectations but with the independent projections as well.

For the full year, the economic growth was 5.6% in 2021, compared to 6.2% estimated by the state forecasting body CNP on February 11. Independent analysts were expecting even higher levels.

Notably, the revised seasonally-adjusted quarterly GDP figures indicate a thin 0.1% QoQ advance in Q3 (revised from +0.4% QoQ) and a steep 0.5% QoQ contraction in Q4.

Romania was close to a technical recession, though. The seasonally-adjusted trajectory was revised downward for the first two quarters of last year as well, notably in Q2 from 1.5% to 1.1% QoQ. But the seasonally adjusted data may be misleading at times of such sharp variations that elude seasonality.

Under a more relevant metric, Romania’s unadjusted GDP rose by a modest 0.6% GDP (comparable prices) compared to the same period (Q4) of 2019. The average growth rate calculated for the two-year period, 0.3% per annum, still reflects sustainable recovery after the ‘Covid quarter’ (Q2) of 2020 - but it is far from the optimistic expectations developed during the first two quarters of the year when the annualised GDP growth rate, calculated over a similar two-year period, rose above 1% per annum.

Rising energy prices may have been among the main causes of the economic slowdown visible through H2, 2021. Such a re-alignment process undergone by the energy prices will most likely have a detectable permanent impact on the economic activity.

The case for growth in Romania should thus be revisited starting from scratch, once the developments in the energy market gain clarity and the relative prices stabilise.

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