Compared to the same quarter of 2023, Romanian GDP growth slowed sharply from 3.0% in the last quarter of 2023 to 0.1% in the first quarter of 2024. A cautious look at the breakdown shows that the economy is not necessarily performing that poorly. Private consumption rose 3.3% and was a key growth contributor, adding 2.6pp to the 0.1% growth, followed by investments, which rose 6.6% and added 1.3pp. That said, the upward pressure of consumption on imports neutralised most of the gains, especially services imports.
Exports remain weak despite recent signs of life shown by both local and German industrial production. Overall, net exports subtracted 2.6pp from growth, cancelling private consumption's positive contribution. Overall, the two main growth engines, consumption and investments, seem to be running decently. And both continue to have solid prospects for the year.
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Romanian retail sales also grew. Growth came in at 0.8% month-on-month in April, following last month's upwardly revised 1.0% MoM growth (from 0.7% initially). This marks a strong start to the quarter for retailers, which comes just after the first quarter's 5.1% sequential growth, one of the strongest on record. Looking at the monthly breakdown, food sales picked up significantly, growing 2.3% (0.1% in March) while non-food sales expanded at a slower but still solid pace of 0.7% (0.1% in March). Meanwhile, fuel sales contracted 2.2%, following the first quarter's steady gains.
Non-food items continue to bring the strongest contribution to growth
While April's solid numbers look largely in line with expectations - given the support from strong real wage growth and credit activity – experts are nevertheless surprised by how this series of consecutive strong releases brings upward revisions to the table as well. It had been ING's view for a long time that consumers would act on their wage gains in a visible manner in early 2024. But the magnitude of the positive response, one of the strongest sequential gains on record, leaves analysts pondering how this will shape growth and the policy implications ahead.
On growth, this strong start to the second quarter (and ING's expectations for still-robust gains in the coming months) cements the view that private consumption will be a strong tailwind for growth this year and a source of upside risks.
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