Monday, December 15, 2008

Romania Q3 final consumption speeds up to 13.7 pct

BUCHAREST, Dec 15 (Reuters) - Romania's final consumption growth accelerated to 13.7 percent in the third quarter from 9 percent in the same period of 2007, powered by rampant domestic spending, National Statistics Board data showed on Monday.

So far this year, the new European Union member has suffered little damage from the global financial crisis, avoiding the economic pain already plaguing western Europe and many of its former Soviet bloc peers in the east.

But with European demand slowing and global cash shortages likely to curb investment, most economists predict a sharp slowdown in 2009 to around 4 percent from this year's roughly 9 percent expansion.

Data showed household consumption accelerated to 14.6 percent on the year in the third quarter from 12.2 percent in the second quarter and from 9.4 percent in July-September 2007.

Economists say unlike most EU states, Romania would need to rein in state spending, particularly on welfare, to prevent economic trouble rather than stimulating growth.

They say a consumption slowdown could occur from as early as from the first quarter of 2009 as crisis would slowly start to impact Romania's economy.

'Spending exuberance is very high. But it may dwindle after Romanians will realise their currency will depreciate and many redundancies will occur. We may even see a dramatic adjustment,' said Ionut Dumitru, head of research at Raiffeisen Bank in Bucharest.

The Romanian economy has doubled in size over the last four years as companies used foreign cash to modernise and household spending rocketed.

But first signs of slowdown are appearing.

Romania saw some of its industrial hubs, such as Renault's Dacia car maker and Arcelor Mittal's giant steel plant in Galati cutting or even halting production over the last month because of falling demand.

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