UPDATE 1 - Romania's Q3 GDP growth slows on lower consumption, investments

UPDATE 1 - Romania's Q3 GDP growth slows on lower consumption, investments Economic growth Author (BNM.md) License: all rights reserved.

BUCHAREST (Romania), November 15 (SeeNews) - Romania's annual economic growth decelerated to 4.4% in the third quarter of 2016 from 6.0% the quarter before, a flash estimate from the country's statistics board, INS, showed on Tuesday.

In the first nine months of the year, the country's gross domestic product (GDP) grew by an annual 4.9%, INS said in a statement.

On a seasonally adjusted quarterly comparison basis, Romania's GDP increased by 0.6% in the second quarter, slowing down from 1.5% in the preceding three months.

Romania's national output expanded by a real 3.8% in 2015, compared to a revised growth rate of 3.0% in 2014.

Commenting on the data, Raiffeisen Bank analysts said that the figures were below their expectations of a GDP growth of 1.0% quarter-on-quarter and 5.2% year-on-year.

"The economic advance decelerated more than we expected in the third quarter, most likely driven by a slowdown of private consumption and of investments," Raiffeisen analysts said in a daily market report on Tuesday.

Also, analysts said that the below-expectations economic growth recorded in the third quarter implies downside risks  for their full year 2016 economic growth forecast of 5.2%.

For their part, ING Bank analysts said that the slowdown in economic growth in the third quarter was caused by a slowdown in private consumption and cooling down in investments due to fading effect of EU funds-related projects.

"Despite receiving significant boosts to disposable income from fiscal and wage policies and with likely more to come even from partial implementation of electoral promises and the upcoming fiscal easing in January 2017 - the one percentage point VAT cut and elimination of special fuel excise, it could be that the consumption story is running out of steam. Still, next year should see a pick-up in investments on the back of higher absorption from the new EU budgeting programme," ING analysts commented in a snap analysis on Romania.

After being surprised to the downside by the third quarter data, ING analysts also said the figures highlight higher downside risk to their 5.2% growth projection, as the slowdown came in a bit earlier than they expected. "Our GDP growth forecast for 2017 stands at 4.1% and is pretty much in line with the job market picture," the analysts concluded.

Erste Bank analysts also said that slower household consumption and investments stood behind this deceleration.

"We maintain our full-year economic growth forecast of 4.5% in 2016 and 3.2% in 2017. The generous fiscal stimulus could wear off next year, while external headwinds ranging from Brexit to Trump’s victory and political developments in Turkey could weigh on Romania’s real GDP," Erste analysts said in a note on Romania on Tuesday.

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