Romania: Fiscal stimulus is boosting growth but puts earlier

​Growth is among the highest in the EU

Substantial fiscal stimulus boosted economic growth to +3.9% in 2015, followed by +4.8% in 2016 and +5.8% y/y in H1 2017. Vigorous domestic consump¬tion has been the key growth driver, with private consumption up by +7.7% y/y in H1 2017 (+7.4 in full-year 2016) and government consump-tion up by +3% y/y (+4.5% in 2016). In contrast, fixed investment has been weak for a long time, declining by -3.3% in 2016 and -1% y/y in Q1 2017, as the government has been slow in taking up new projects financed by EU funds under the 2014-2020 programming period. But it finally resumed modest growth of +2.4% y/y in Q2. And, inventories made positive contributions to growth in H1 (+1pp) and 2016 (+1.1pp). External trade activity accelerated in 2016 and Q1 2017 but eased somewhat in Q2. On average in H1 2017, exports rose by +8.7% y/y and imports by +10% y/y so that net exports subtracted -0.6pp from H1 growth (-0.7pp in 2016).