GDP growth gains steam

According to the preliminary data, GDP rose by 2.6% in the second quarter, a marked improvement compared to the 0.9% seen in Q1. But the calendar adjusted growth rate was only 2.2% and the seasonally and calendar adjusted rate was 1.7%, slightly below the EU average and well below the growth rates achieved by Poland, Slovakia and Romania.

Still, the fact that the actual growth rate surpassed the analysts’ expectations (the average forecast was just above 2%), while the opposite was true during much of the past year and a half is a welcome change. GDP grew by a seasonally adjusted 1.1% against the previous quarter, as opposed to the (revised) 0.7% decline in the first quarter.

The CSO announced that on the production side not just (recently reviving) industry and market services were the drivers of growth, as previously expected, but agriculture as well. This might be the key factor behind the higher-than-expected growth rate, even if the acceleration of the growth of services (already as strong as 3% in Q1) may have been somewhat steeper than expected too. Industry began to grow after the first-quarter stagnation, albeit erratically, while construction – still under the spell of the temporary hiatus in EU funded projects – continued to fall by roughly 25%. On the whole, while in the first quarter economic growth was driven by only one component and hindered by three, in the second quarter the situation was just the opposite.

On the expenditure side, net export – a crucial hindering factor in the first quarter – is the most likely factor behind the acceleration in the second quarter: according to the merchandise trade statistics, export growth gained momentum in the second quarter while import growth subsided somewhat. Consumption growth may have gathered additional momentum, as the retail trade figures suggest, while fixed capital formation probably kept contracting at a similar pace as in Q1.

While industrial value added is likely to grow the second half of the year at a rate similar to Q2 (roughly 4%), the plunge in construction, after a gradual deceleration, will probably come to a halt by the end of the year. Since the second-quarter data points to a certain degree of expansion of agricultural value added in 2016 as a whole – which was not the case so far – the overall yearly GDP-growth may even slightly surpass our current growth projection, 2.2%.