National Statistics Institute announces that the GDP fell over 10%, Cîţu says he's pleased with the evolution of the economy

EMILIA OLESCU (Translated by Cosmin Ghidoveanu)
English Section / 9 septembrie 2020

National Statistics Institute announces that the GDP fell over 10%, Cîţu says he's pleased with the evolution of the economy

Under the current circumstances, the revisions would be bigger than higher than usual

Statistical data announces a steep economic drop, from one year to the next, but the Finance Minister says he's pleased with our economic evolution, given the current international context.

The first half of the current year has brought with it a drop of the GDP of 4.6% on the gross series (with an amount of 440.21 billion lei), respectively 3.9% on seasonally adjusted series (with a value of 510.49 billion lei), compared to the first quarter of 2019, according to the provisional data published yesterday, by the National Statistics Institute (INS).

The estimated GDP for the second quarter of the current year has amounted to 238.5 billion, down 12.3% compared to Q1 2020 and 10.5% over Q2 2019, on the seasonally adjusted series, according to the press release of the INS.

INS specialists emphasize that, "signal" estimates, as well as the provisional GDP estimates are affected by the difficulties created by the pandemic crisis and by the enacting of the state of emergency and the state of alert. The INS press release states: "These difficulties have been tied to the collection of the basic data which represent entries for the national account and have resulted in an increase in the rate of non-response. Alternative sources have been used for completing the information, in order to reduce the effects of those causes on the quality of the produced indicators as much as possible.

According to current practices, the data published today (ed. note: yesterday) will be the revised, according to the schedule of press releases and the revision for policies for the nation's accounts published on the INS site, as new data sources become available. Under the current circumstances, revisions could be bigger than usual".

Finance Minister Florin Cîţu says that the numbers announced by the INS are good given the global economic context. He wrote yesterday, on his Facebook page, after the National Statistics Institute published the provisional data on the evolution of the Romanian economy: "Good news from the economy, in the context of the biggest economic crisis in the last hundred years.

In the second quarter, the economy was affected by nearly two months of state of emergency. Still, the investments have had a positive contribution to the economic increase of 0.4 percentage points. I do not think that there are many countries that can show such a performance. The second piece of good news - in July the nominal net wage increased 8.1% compared to July 2019.

This increase of the net earnings that millions of Romanians is very important, especially in the context of the global economic crisis.

In order to keep the pace and to ensure the rapid recovery of the economy, the fiscal and monetary policy need to work in tandem.

The fiscal space is limited, but there is still room for easing on the interest rate and minimum required reserves side.

The injection of liquidity in the economy has so far worked perfectly. We have to continue".

INS: "Almost every economic sector has contributed to the drop of the GDP"

In the first half of the year, nearly every economic sector has contributed to the drop of the GDP, with the biggest drops being seen by the following sectors: industry (-3%), which accounts for 19.3% of the GDP and whose activity has decreased 14.1%; entertainment, cultural and recreation events; maintenance of household appliances and other services (-1.1%), with a weight of 2.8% in the creation of the GDP and which saw their activity decrease 29.1%; retail and wholesale trade; vehicle and motorcycle maintenance; shipping and storage; hotels and restaurants (-0.9%), with a weight of 20.1% in the formation of the GDP and whose volume of activity has decreased by 4.8%, according to the quoted press release. It says: "The following branches have had a positive contribution: construction (+0.5%), with a weight of 3.7% in the formation of the GDP and which saw a rise of 15.5%; information and communications (+0.7%), with a weight of 7.2% in the formation of the GDP, which saw an increase in volume of 12.1%; public administration and defense; social security in the public system; education; healthcare and social welfare (+0.2%), with a weight of 16.6% in the formation of the GDP, which saw a volume increase of 1.5%".

The INS concludes: "In terms of the use of the GDP, the drop has been owed particularly to household spending on end consumption, which decreased 5.3%, contributing -3.5% to the drop of the GDP. The following components have had positive contributions: the gross formation of fixed capital, which contributed +1.2% to the rate of modification of the GDP, following the increase of its volume by 5.8%; the end collective effective consumption of public administrations, which has contributed +0.9% to the modification rate of the GDP, following the increase in volume of 8.7%. A negative contribution to the drop of the GDP came from net exports (-2.3%), as a result of the drop by 15.1% of the volume of exports of goods and services correlated with a smaller drop of the volume of imports of goods and services, by 9.4%".

Officials' estimates show that the Romanian economy could drop 3.8% this year, and the budget deficit could amount to 8.6% of the GDP.

The National Strategy and Forecast Commission predicts an 8.6% drop in industrial output, a drop in agricultural output of over 7% and a growth of 5.6% in the construction sector. The European Commission has gloomier estimates, as it expects that the GDP will drop 6%, by the end of the year. At the same time, the Report of the NBR on inflation predicts that the domestic economy will drop to an almost negative value close to that seen at the peak of the 2008-2009 economic crisis.

Experts from BCR estimate, for this year, an economic drop of -4.7%, followed by a recovery of +3.9% in 2021 and +3.7% in 2022. Significant European grants allocated to Romania (an annual median of 2.4% of the GDP in the following decade) can support investments in the coming years and can reduce the effect of a possible fiscal consolidation process, a report by the bank shows.

The most significant drops since 1995, when Eurostat began publishing this type of data: Eurozone GDP has decreased 14.7%, and that of the EU - 13.9%

In Q2 this year, still marked by the isolation measures passed by most of the EU member states to stop the spread of the coronavirus pandemic, the GDP has seen a decline of 11.8% in the Eurozone and of 11.4% in the EU, compared to the previous three months, data published by the European Statistics Office (Eurostat).

The Eurostat press release points out that these are the most significant drops since it began publishing data, (1995). In the first quarter of 2020, the GDP has seen a decline of 3.7% in the Eurozone and 3.3% in the EU, compared to the previous three months, says Eurostat, according to Agerpres.

Among member states, which data for the second quarter of 2020 is available for, compared to the previous three months, the harshest drops were seen in Spain (-18.5%), Croatia (-14.9%), Hungary (-14.5%), Greece (-14%), Portugal (-13.9%), France (-13.8%), Italy (-12.8) and Romania (-12.3%). At the opposite end are Lithuania (-5.5%), Estonia (-5.6%), Ireland (-6.1%), Latvia (-6.5%) and Denmark (-6.9%).

In the first six months of 2020 compared to the similar period of 2019, the Eurozone has seen a drop of 14.7% and the EU, one of 13.9%, after 3.3%, and 2.7%, respectively, in the first three months of 2020. They are also the most significant drops since Eurostat has been publishing this data.

The evolution of some economic indicators in the first six months of 2020, over the similar period of 2019:

-The volume of industrial output has decreased 16.4%. The most vulnerable branches, in the context of the pandemic, are light industry and the industry of capital goods (vehicle manufacturing, machinery and equipment and the manufacturing of electrical devices), according to Hotnews;

-New orders in the processing industry have decreased 14.1%, with the most affected branches being the manufacturing of other means of transportation (-27%), the manufacturing of clothing (-25.1%) and the manufacturing of textile products (-18.5%);

-Retail turnover has increased 0.5%, amid the increase in the sale of food products (+7.6%), while fuel sales decreased 10.8%;

-Exports of goods have seen a drop of 18.1%, while imports of goods have decreased at a lower rate of 12.6%, backed by the internal demand, to a level of 37.3 bln Euros;

-On the labor market, the effects of the pandemic have led to a 0.6% drop in the number of employees (calculated as a median of monthly numbers), to 4.94 million people.

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