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Higher tax collections in Romania bolster GDP growth in Q1 over 7%

Autor: Bancherul.ro
2008-06-01 18:09

Romania’s gross domestic product (GDP), measuring the country’s economic growth, nudged up 6.5-7.8 percent in the first three months of the year analysts said, gauging a 7.4 percent advance stemming from healthy tax collections, strong growth in constructions.

Net taxes rose 80 percent in nominal value in the first three months of the year over the same period last year, chief economist with the largest bank by assets in the country Banca Comerciala Romana (BCR), Lucian Anghel said.

Romania’s GDP could have accelerated 8 percent had it not been for slight drop in the processing industry in March when Dacia workers went on strike. Therefore, the economic growth could reach 7.5-7.8 percent, Anghel gauged.

Constructions remained the main drive of the GDP, rising 30 percent, a pace which could remain unchanged throughout the year, though it could brake if costs hike.

The economic growth in the first quarter is estimated at 7.5 percent, chief economist of Raiffeisen Bank Romania Ionut Dumitru said while the senior economist of ING Bank Romania, Nicolaie Alexandru-Chidesciuc said 7.4 percent, the same as chief economist with Alpha Bannk, Ella Kallai.

Credit Europe Bank analyst Georgiana Constantinescu revised upwards the GDP prognosis from 5.8 percent to 7.5 percent in the first quarter, estimating a 32 percent growth of constructions and a good evolution of services, despite reduced growth pace.

Industrial production increased 5.4 percent in the first quarter this year versus the same period last year, according to the country’s Statistics Institute (INS).

Moreover, consumption slowed down a bit, Constantinescu said, adding this is a good thing as economic growth should be spurred more by production and investments coupled with trimming negative contribution of net exports.

Thus, the national currency’s fall from the beginning of the year tempered the widening of the trade balance as exports accelerated more swiftly than imports. Yet, Romanian exports could brake after economic growth in the Eurozone, Romania’s main partner, slowed down.

Still, analysts mull this is not a significant factor for the balance of trade, as the gap can be narrowed by limiting imports as well.

On the other hand, analyst Radu Craciun said that reduced power of purchase in the Eurozone could make the people turn to cheaper products among which those from Romania. He sees a 6.5-7 percent economic growth in the first quarter this year, fueled by constructions and tax collections, but also by demand, consumption and investments.

Volatility of economic growth points to the need of investments

Agriculture could influence significantly the GDP throughout the year, despite reduced contribution in the first quarter.

Estimates foresee double production in agriculture this year, Lucian Anghel from BCR said, adding there are good signs for the wheat production. Consequently, a good agriculture year could pave the way to a GDP increase over 7 percent, he added, stressing some crops such as sunflower and maize need much rain.

Last year, Romania’s early fall crops were destroyed by the summer drought, affecting the economic growth and the currency too.

Economy and Finance Minister Varujan Vosganian said in the first half of the month that Romania’s economy hiked 7.5 percent in real terms, in the first three months this year.

Analysts gauge an economic growth of 6-7 percent for the whole year, anticipating a slow down of the growth pace by the end of the year caused by harsher fiscal policy measures.

Another factor to brake the GDP growth is the tempering of the economic advance in the Eurozone, analysts said.

The country’s Statistics Institute will release on June 2 data regarding the GDP in the first quarter this year.

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