Friday, December 4, 2009

Romania’s Economic Contraction Eased on Industry

By Adam Brown

Dec. 3 (Bloomberg) -- Romania’s economic contraction eased in the three months ended September as an increase in industrial output and sustained lending growth indicate the country may emerge from recession as early as next quarter.

Gross domestic product shrank an annual 7.1 percent in the third quarter after declining 8.7 percent in the second, the National Statistics Institute said in an e-mail today, citing final data. The quarterly contraction slowed to 0.6 percent from 1.1 percent in the previous period.

“Industry is leading the improvements in the economy thanks to western Europe,” Vlad Muscalu, an economist at ING Bank Romania SA, said in an interview today. “Agriculture is also a slightly positive spot.”

Growing demand from western Europe, eastern Europe’s main trading partner, is helping the region emerge from its worst recession since abandoning communism. The economy of Germany, a key buyer of eastern European products, expanded 0.7 percent last quarter. That’s supporting a recovery in the European Union’s second-poorest member, which is relying on a 20 billion euro ($30.2 billion) bailout from the International Monetary Fund and the European Union to stay afloat.

The IMF expects Romania’s economy to contract 7.5 percent this year, raising an earlier forecast for an 8.5 percent contraction.

Markets

Romania’s benchmark BET stock index rose 0.4 percent in Bucharest trading as of 10:10 a.m. today. The yield on the benchmark euro bond due June 2018 was little changed at 6.256 percent, while the leu strengthened 0.3 percent to 4.2280 per euro.

Central bank Deputy Governor Cristian Popa said last month the economy may grow 1.5 percent next year, raising an earlier forecast of 0.5 percent growth. Romania’s economy grew 7.1 percent last year, the fastest pace in the European Union.

Industry grew 3.6 percent in the third quarter, its first quarterly expansion since last year, the statistics institute said today. Western demand has benefited exporters such as carmaker Dacia SA and chemicals exporterOltchim SA. In the first half, Dacia, food producer Kraft Romania SA and steelmaker ArcelorMittal Romania SA cut jobs or closed factories to cope with lower demand.

The decline in consumption slowed to an annual 1.1 percent from 15.7 percent as lending growth increased an annual 2.6 percent on the year in September and annual wage growth was 4.9 percent.

The decline in the construction industry deepened in the third quarter to 17.4 percent on the year from 14.2 percent in the previous period, the statistics institute said. Agriculture grew 2.4 percent after declining 9.1 percent and the service industry contraction slowed to 11.3 percent from 11.4 percent.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net

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