Romania Hits ‘Technical Recession’ Despite Annual Growth

A seasonal rise in industrial activity helped Romania's economy to grow by an annual 2.4 per cent in the first six months of the year, according to data released on Wednesday by the Statistics Institute, INS.

But on a quarterly basis, GDP fell by 1.0 per cent in the April-June period, based on seasonally-adjusted data, after a 0.2 per cent contraction in the previous quarter, according to INS.

Economy Minister Constantin Nita put an optimistic spin on the data.

"Although Romania's economy saw two straight quarters of decline in the GDP, considering the entire examined period, it remains on a positive trend with a seasonally adjusted economic growth of 2.6 percent compared to the similar period of 2013," he said.

But economic analyst Stelian Muscalu was more sceptical.

"In fact, official data shows that Romania has sunk into a technical recession this year," Muscalu said.

Muscalu attributes the contraction to a fall in government spending and a drop of 10 per cent in foreign direct investment.

First-half net investments fell 9.1 per cent to 25.2 billion lei (5.7 billion euro) from the same period a year earlier, with declining activity in construction, machinery and equipment, the INS data showed.

Another issue is that the government in Bucharest has failed to effectively spend more of the 20 billion euro made available by the European Union to help Romania catch up with more developed EU member states.

In 2013, the country's economy expanded by 3.5 per cent.

Romania experienced a deep recession in 2009 and 2010, when business activity contracted by 9.1 per cent. The economy slumped again early in 2012.