Real GDP backed by exports and government consumption in 4Q09

Seasonally adjusted data show that consumption went up by 1.1% q/q in 4Q09 due to a minor increase in households consumption (+0.9% q/q) and a rather strong rise in government consumption (+4.4% q/q). While the former could continue to recover very slowly in the coming quarters (with some risks from rising unemployment), the latter is pretty unlikely to repeat this good performance due to the ambitious fiscal consolidation programme followed by the government under the stand-by arrangement with the IMF. Gross fixed capital formation fell 2.7% q/q as companies refrained from investing against the backdrop of sluggish lending activities and depressed domestic demand. Exports advanced by 0.7% q/q supported by higher external orders from Eurozone countries while imports decreased by 1.4%.

The data shows that Romanian economy will exit recession with a time lag of at least two or three quarters as compared to Eurozone. Besides the global developments, government's challenging task of reducing the budget deficit to 5.9% this year (from 7.2% in 2009) will have a negative impact on real GDP. Taking all these into consideration, 2010 economic growth could stay at 1.9%.

Central bank is likely to continue the monetary policy easing cycle bringing the key rate to a record low at the next meeting in March. So far the improvements in real GDP were attributed mainly to higher foreign orders for Romanian industry but it seems that the important domestic market should do a better job in this respect.

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