Romania’s economy grew by 3.9 percent in the first quarter of 2014 compared to the same quarter last year, which is 0.1 percentage points more than initially announced, according to revised data released by the National Statistics Institute (INS).

Initially, the GDP growth for the first quarter, which was announced mid- May, was 3.8 percent, the largest in the European Union. The figure was revised upwards due to an improvement in the construction sector and in the professional, scientific and technical activities, activities of administrative services and support services, INS data shows.

The main driver for economic growth in the first quarter was the internal demand, which contributed 2.7 percentage points to the 3.9 percent GDP growth. External demand contributed 1.2 percentage points.

Private domestic consumption saw a 6.5 percent increase to the same quarter in 2013, contributing 4.3 percentage points to the GDP dynamics. “This evolution was determined by a series of factors, among which the increase of the minimum wage, the reduced inflation, bringing to surface some of the grey economy and the fuel price increase on April 1,” Andrei Radulescu, senior economist for Banca Transilvania explained.

However, investment in the economy contracted 8.4 percent and had a negative contribution to the GDP dynamic. Public consumption also decreased.

From an aggregate offer perspective, the main drivers of the GDP growth were the industry and retail, while construction and financial services saw declines in the first quarter.

“These evolution confirm the scenario of economic rebalancing, a process which implies a balanced contribution of al GDP components which converge to the potential growth rate of the economy. For this process to be sustainable, investment in the economy must also be re-launched,” Radulescu said.

Andrei Chirileasa, andrei@romania-insider.com