The first detailed Q1 GDP data confirmed the slim 0.1% y/y GDP growth indicated by the flash estimate but revised the q/q advance downwards from 0.5% to 0.4%. Robust consumption rise was sourced from more imports, data showed. 

Furthermore, the main sectors posted negative contributions to the overall annual growth, while the net taxes (8.6% of total GDP) made a net positive contribution of 0.6 percentage points (pp), indicating that fewer (energy) subsidies were distributed this year compared to Q1 2023 as long as the tax revenues remained roughly at the same level.

The value added generated by industry contracted by 1.1% y/y, the decline in construction was steeper (-2.4% y/y), and the sector of services to households also contracted by 1.7% y/y. Only IT&C continued to advance (+2.0% y/y) despite the problems reported in the sector, while agriculture (seasonally not very significant in Q1) also generated 2.1% y/y more value added.

Also notably, Romania’s seasonally adjusted GDP remained for two consecutive quarters (marginally) below the peak level reached in Q3 last year, despite the 0.4% q/q recovery in Q1 that offset most of the 0.6% q/q decline in Q4.

On the GDP utilization side, the domestic demand increased significantly, driven by both private (+3.4% y/y) and public (+4.0% y/y) consumption. Gross capital formation contracted slightly by 0.8% y/y, despite the +6.6% y/y advance in the gross fixed capital formation (implying a negative dynamics of inventory).

Overall, it means that Romania’s domestic consumption was mainly sourced from higher imports. In volume terms, the exports (goods and services) contracted by 1.2% y/y while the imports increased by 3.7% y/y. The net imports accounted for 4.5% of domestic demand (consumption and investments), compared to 4.2% in Q1, 2023.

iulian@romania-insider.com

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