BUCHAREST, Dec 3 (Reuters) - Romania's economy shrank by 7.1 percent in the third quarter versus a year earlier, data showed on Thursday, confirming a preliminary flash estimate and raising analysts expectations of more interest rate cuts.
Domestic consumption, the biggest component of the economy, shrank sharply by 11.8 percent in the third quarter on the year, compared with a 12 percent contraction in the second.
Analysts polled by Reuters in November had produced a mid-range forecast of a 9 percent fall versus a year earlier.
The data showed the economy contracted from July to September by 0.6 percent when compared with the previous three months. Analysts said the economy could possibly show marginal growth in quarter-on-quarter terms by the end of this year or in early 2010.
The International Monetary Fund forecasts a full year economic contraction of 7.5-8.0 percent.
Romania's central bank paused in a rate easing cycle after a political crisis toppled a centrist minority government in October and threatened Romania's 20 billion euro, IMF-led rescue deal.
Analysts hope political parties will agree on a new government following a presidential election on Sunday, and expect the central bank to then continue cuts that have reduced the main rate by 225 basis-points this year to 8.0 percent.
At 0801 GMT the leu was bid at 4.2250 per euro, little changed from levels before the data.
Parallel data showed Romanian industrial producer prices (PPI) fell 0.7 percent on the year in October and were up 0.3 percent from the previous month.
Q3 (Y/Y) Q3 (Q/Q) Q2 2009 (Y/Y)
REAL GDP -7.1 -0.6 -8.7
Final consumption -11.8 -1.1 -12.0
Gross fixed capital
formation -28.6 -4.6 -25.2
Exports of goods
and services 1.6 4.9 -12.2
Imports of goods
and services -15.3 3.9 -26.9
Agriculture -2.4 15.1 -9.1
Industry -3.5 3.6 -7.3
Construction -7.4 -5.5 -14.2
IONUT POPESCU, ECONOMIC ADVISER OF ACTING PRIME MINISTER BOC
'The data create a premise for economic recovery to surface as early as the first quarter in 2010. The main engine for recovery would be exports, likely to recover because of a pick-up in demand in western Europe.'
ROZALIA PAL, UNICREDIT TIRIAC BANK IN BUCHAREST
'Considering the Q3 GDP data, our year-end GDP estimates will adjust now to -7.0 percent.'
'This change, compared to what was initially expected for Q3, is because the positive surprise from the agriculture sector.'
'Industry, construction and services performed in line with our expectations.'
MELANIA HANCILA, VOLKSBANK IN BUCHAREST
'The surprise comes mainly from industry figures and from agriculture.'
'I see GDP shrinking by 6.2 percent in the fourth quarter, which would lead to a full-year contraction of around 7.0 percent.'
'The central bank will resume its easing cycle after the political situation stabilises.'
IONUT DUMITRU, RAIFFEISEN BANK IN BUCHAREST
'The figures are in line with expectations. They show that there are higher chances that the economy will re-enter an upward trend from Q4.'
'I see it (growth) ranging between 0 and 1 percent in the fourth quarter, but a more precise estimate is hard to make.'
VLAD MUSCALU, ING ( ING - news - people ) BANK IN BUCHAREST
'The big difference from our estimates comes from agriculture. We had expected a poor performance, but it performed well.'
'On the other side we had expected a recovery in services, but it didn't happen.'
'All in all, these figures signal more rate cuts will follow, but only after fiscal reforms resume.'