Final consumption expenditure of households in Romania increased by 6.4% y/y in Q1, faster than in Q4 (+5.1% y/y) or Q3 (+2.8% y/y) last year despite broad expectations for subdued private consumption driven by higher interest rates and inflation.

Also on the demand side, the capital formation contracted by 7.5% y/y in Q1 – but this was only due to a much smaller change in inventory because the gross fixed capital formation actually increased by 13.2% y/y.

On the GDP formation side, robust private consumption resulted in an equally significant (+4.5% y/y) advance of the value added generated by the sector of services to households. The sector contributed 0.9pp out of the total 2.0% advance of the Gross Value Added.

The other sectors that posted significant growth rates in Q1 were IT&C (+5.6% y/y) and B2B services (+10% y/y). Both these two sectors contributed 0.5pp each to the overall Gross value added advance. 

Raiffeisen Romania chief economist Ionut Dumitru says that the country's GDP will inevitably slow down this year, but a 3% growth, as expected by Raiffeisen, is still robust all things given, and also in the regional context.

"It was inevitable that economic activity would slow down. However, we expect Romania's economic performance to remain quite good. We have a forecast of 3% economic growth for this year, which apparently seems small, but it's not at all small compared to other countries in the region. Romania can have better economic growth, and I think this should make us happy," said Ionut Dumitru, quoted by Economica.net.

iulian@romania-insider.com

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