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Romanian Q3 GDP grows 8.3% on consumption

Romanian economic growth accelerated in the Q3, led by rising demand and construction as the country prepares to join the European Union on January 1.

GDP grew an annual 8.3% in the Q3, compared with a rate of 7.8% in the previous three months, the Bucharest-based National Statistics Institute said today in an e-mail. The economy grew an annual 7.8% in the first nine months of the year. Increased spending, investment and building helped push the economy to its fastest quarterly rate of growth since the final three months in 2004 and toward its seventh consecutive year of growth. The government is counting on continued growth to bring living standards closer to those of other EU countries.
„This is good news but one cannot avoid a feeling of slight concern that this should somehow come down,” Radu Craciun, ABN Amro Bank Romania's head of research, said in a phone interview today. The data „show no sign of a consumption slowdown. The central bank's policy of trying to contain consumption has had limited impact.” The central bank has taken measures in the past year and a half to temper rising consumption and slow inflation, including raising minimum reserve requirements for banks and restricting the amount individuals can borrow.

Consumption increased an annual 11% in the first nine months of the year while investment rose 14.1% and construction grew 17.7%. The service industry rose 7.8%, the Bucharest-based institute said. In the Q3, construction grew an annual 19.2% while services increased 8.5% and consumption rose 11.2%, the institute said. GDP in the Q3 totaled 92.66 billion lei ($35.6 billion) in current prices. Nine-month GDP was 229.6 billion lei, the institute said.
Agriculture, which contributed to slowing growth last year because of severe flooding, increased an annual 5.2% in the Q3 of this year and 3.5% in the first nine months, the institute said. The economy grew an annual 4.1% in 2005. Florin Georgescu, deputy governor of Romania's central bank, said on December 5 that the annual inflation rate may slow this year to as low as 4.7% from 8.6% in 2005. The National Bank of Romania will meet on December 28 to discuss monetary policy. The benchmark reference rate was left unchanged at 8.75% on November 10. (Bloomberg)