Financial analysts find 4.4% economic growth rate puzzling

The National Statistics Institute yesterday disclosed Romania’s economic growth rate in the first quarter: 4.4%. This figure immediately raised suspicions among analysts, as the industry is known to have slowed down quite a bit in the first months of the year – a mere 1.1% growth.

“The released figures engender a big question mark: what does this economic growth actually stem from, as the 4.4% level does not result from the base components?” Daniel Daianu, an economy professor and former Finance minister told Ziarul Financiar.

“According to the released information, we are dealing with a statistic incongruity. If the services, which hold the largest share, increased 3.4%, this means that the rest of components must have grown at least 5% each. However, industrial output, which only went up 1.1%, shows there’s a discrepancy,” Daianu explains.

In fact, the released figures, regarding the Gross Domestic Product formation, in no way point to the 4.4% result.

The largest increase is posted by constructions – 5.6%, but they only account for 5% of the GDP. Services, which contribute 46% to the GDP formation, have recorded the second-largest increase, but it only stands at 3.4%.

According to the Institute, industry contributed 2.6% to the GDP, although industrial output only increased 1.1%. Such a discrepancy has not occurred in the past ten years, when the gap generally revolved around 0.3%-0.4%.

Agriculture is credited with a 7.1% increase, while financial mediation services dropped 3.4%. The biggest increase, 11.5%, was posted by “product net taxes,” which account for the gap between product taxes paid to the budget (VAT, excises, customs duties) and product subsidies paid from the state budget. The low level of tax collection could only be explained by a cut in subsidies.

“This figure exceeds our expectations, consider the tight correlation between the Gross Domestic Product and the industrial output, which has been apparent in the past ten years’ statistics. As industrial output has merely gained 1.1%, we would have expected a smaller increase,” said Radu Craciun, senior analyst at ABN Amro Bank.

In the first quarter of last year, industrial output had increased 4.2%, while the Gross Domestic Product had gained 3.1%. This time, things would be the other way around: a 1.1% industrial output growth contributing to a 4.4% GDP increase.

“At the sight of these figures, one can only say there must be some mistake. Constructions cannot account for this growth, as industrial output only increased 1.1%. Industry is the main growth engine, so that there is no way we can get to the 4.4% level, even if we consider an estimate for agriculture,” said financial analyst Aurelian Dochia.

On the other hand, Development and Prognosis minister Leonard Cazan says industry contributed some 2.6% to the GDP, also adding zootechnics.