GDP decline slowdown in Q3 takes analysts by surprise

"Good news", "the biggest surprise", "much better than expected" or "a ray of light in these dark times". This is what foreign analysts say about the performance of Romania's economy in the third quarter, which might be the last quarter of decline according to the latest forecasts. This is the first signal that may suggest the bottom of the crisis was reached and the rebound is due to begin.

The economy shrank by 0.7% in the third quarter compared with the second, but the decline pace was slower than in the second quarter, when it reached 1.1% though, compared with the first three months of the year. The annual decline for the third quarter stood at 7.1%, while the market expected a contraction of 9% in annual terms and even worse, in some analysts' case.

"Romania was probably the biggest surprise. The contribution of the various sectors can only be guessed. Domestic demand is expected to have remained weak, so improvements are probably coming from foreign demand and increase in stocks," comments Rainer Singer, Erste Group's chief economist for the region.

In the opinion of analysts, the rebound of the industry and most likely of the services sector may have had a beneficial influence that is hard to overlook on the positive progression of the economy in the third quarter. A massive positive contribution to the GDP growth also came from net exports, given that imports were twice faster to go down than exports. At the same time, agriculture, too, might have had a beneficial influence on the household consumption and exports, analysts believe. On the other hand, the contribution of domestic demand probably remained negative, as companies cut investments during this difficult period, with a downward trend also estimated for consumer spending.

"Finally some good news" comments Lars Christensen, chief economist of Danish bank Danske, in turn. "Romania was badly hit by the economic crisis and even worse by the political crisis. Still, the data on the GDP progression in the third quarter are a ray of light in these dark times for Romania."

The data announced by the National Statistics Institute (INS) are just some advance estimates, with the preliminary version of the first nine-month data to be published on December 3.