The industry has reverted to being one of the economy's growth drivers, for the first time since 2002, after five years of performing below the average economic rate, reveals data from the National Statistics Institute.
As a result, the gross added value in the industry increased by 7.8% in the first quarter, significantly faster than the 6% rate of the Gross Domestic Product (economic growth). The last time industry was the economy's growth driver was back in 2002.
Why is this trend important? Although the economy chiefly is sustained by the strong growth of consumption, supply is beginning to rebound. Up until now, demand was the prime growth driver, whereas recently the industrial and constructions sectors have started driving the economy up.
Industrial growth registered above the overall economic rate can be explained in two ways, says Daniel Daianu, professor of economics and former finance minister. "Circumstances seen in 2007 are working in conjunction with economic trends witnessed over the last few years," he believes.
Firstly, the massive demand from the construction sector has given a significant boost to the industrial output of fields associated with constructions. The highest output increase in the first quarter of this year was reported by the constructions materials industry (58% compared with 7.7% of the overall industrial output).
In turn, the extraction of construction materials witnessed a 42% increase, and wood processing increased by more than 25%. In terms of production increases, three out of the top five industries in the first quarter were associated with constructions.
Secondly, the industry is starting to feel the effect of the "waves of foreign investment over the last few years," Daianu believes.
These peaked at an all time high last year, when Romania received a total of 9.1 billion euros from direct foreign investments.
In addition, in 2006, the industry registered its fastest growth rate of the last five years, 7.1%, which could be surpassed this year if the industry maintains its present rate and continues to be one of economy's drivers.
Aside from industrial growth exceeding GDP growth, another macroeconomic trend is beginning to take shape. This year's drought, on the one hand, and the construction boom, on the other, will enable the constructions market to account for a larger share of the economy than agriculture for the first time in 17 years. Construction is expected to exceed 8% of the GDP, while agriculture is expected to stand at 7% of the GDP.
"Construction sector is driving the economy up and this can be easily seen. At the moment Romania is an economy under reconstruction and, in this respect, resembles a post-war economy," Daianu says.
The former finance minister believes the economy has left behind the unstable years, when economic shocks like skyrocketing energy rates (including the international oil quote) or the volatility of the exchange rate would cause serious macroeconomic implications.
"These shocks required a period of adjustment on the part of the economy," he says.
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