”The economic performance of 2013 will not be continued at such robust levels, as last year’s growth contributors are not sustainable. This is already confirmed by the technical recession during the first two quarters of 2014. Nevertheless, a stable growth rate of 2.5% in 2014 will be supported by significant volumes of exports shipped to Eurozone countries and the gradual rebalancing of the country’s economy towards domestic demand,” Grzegorz Sielewicz, Economist, Coface Central Europe, stated.
Romania’s GDP growth in 2013 was at 3.5% year on year, supported by exports and in particular exports of agricultural products and cars.
The rating agency said that the strong growth dynamics are unlikely to be repeated this year, whereas base effects will be evident during the second half of the year.
According to Coface, expectations for agricultural output in 2014 are mixed, but the most realistic scenario seems to be that the harvest will be lower than in 2013.
“Exports will remain driven by the demand for new cars, a sector which makes a strong contribution to the performance of Romanian industry. Internal demand will also show signs of improvement, with household expenditure rising – although it will still be constrained by the sluggish growth in credit. The growth of fixed asset investments will not increase in line with private consumption, as companies are still not fully convinced that the economic recovery is sustainable,” Coface said.
In April, Coface raised its growth forecast on Romania’s economy to 2.3% this year from 2.1% previously, but warned of a still fragile business environment.
According to statistics institute INS, Romania’s economy contracted for the second consecutive quarter in the April-June period, driven by poor performance in constructions, industry and an unexpected fall in retail trade. INS confirmed an earlier estimate showing a 1% decline in seasonally-adjusted gross domestic product in the second quarter, after a 0.2% contraction in the previous three months. This puts the economy in technical recession.
Fitch Ratings Saturday affirmed Romania’s long-term foreign and local currency ratings at ‘BBB-‘ and ‘BBB’, respectively, with stable outlooks, and revised down its forecast for 2014 GDP growth to 2.2% from 2.8% previously.