IT&C Surprising Contribution to 6.5% GDP Growth in Romania

The Romanian National Institute of Statistics detailed on June 8 that Q1 GDP indicates 6.5% YoY growth and a significant contribution from the IT&C sector.

The details confirmed expectations that private consumption (+7.1% YoY and +3.5% QoQ) was the main driver stimulating the formation of the sector of services to households (+11.2% YoY and +6.2% QoQ).

The Gross Domestic Product estimated for Q1 2022 amounted to EUR 691,228.81 at current prices, increasing by 5.2% against Q4 2021 and compared to the first quarter of 2021 was recorded by 6.5%.

On the utilization side, household consumption alone provided 5.1 percentage points to GDP annual (YoY) growth, while gross fixed capital formation and inventory build-up contributed just 0.5 percentage points, and foreign trade had a neutral contribution.

While the specific data given by INS confirms analysts’ estimates about the drivers of Q1’s impressive economic growth, it leaves many concerns unexplained.

Thus, the IT&C sector’s substantial increase was partly explained by a sharp industry pricing decline, both in QoQ and YoY terms, of 9% -10%. It’s unclear how this happened and what it means for the sector’s productivity.

Looking at these statistics as a whole, one can see a rather significant discrepancy. This suggests that the dynamics of individual sectors are insufficient to explain the dynamics of the entire GDP. The April retail sales data released recently provided an excellent illustration: food, non-food, and fuel sales increased by 1.6%, 2.2%, and 3.6%, respectively (MoM), but sales increased by only 0.3%.

Moreover, the dynamics of the economic sectors would predict a higher YoY growth rate than the actual 6.5% increase. Such effects are expected for severe one-time shocks like the pandemic lockdown or a spike in energy costs, and the resulting retrograde modifications will be considerable.