Economic effects of the corona crisis

Romanias GDP dropped over 12% in the second quarter of the year, compared to the first, the National Statistics Institute announced

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Daniela Budu, 09.09.2020, 14:00

The pandemic triggered a substantial contraction of the Romanian economy in the first half of the year. According to the National Statistics Institute, in the second quarter the GDP was 12.3% lower than in the previous quarter.

All economic sectors contributed to this result, with important negative effects coming from the industry, whose output dropped around 14%, from cultural and entertainment activities, from appliance repairs and other services, whose volume fell by nearly 30%.

Increases have been reported in constructions, information and communications, public administration and defence, social security, education, healthcare and social assistance. The finance minister Florin Cîţu expects the domestic economy to see limited growth in the third quarter and thus to avoid technical recession, i.e. 2 consecutive quarters with decreasing GDP. He adds that in the next quarter, the highest risk is the contribution of agriculture to the GDP, but he also emphasises the positive role of investments.

Even so, economic analyst Aurelian Dochia believes the GDP drop by the end of the year is rather unlikely to be only 4%, as the government forecasts.

Aurelian Dochia: “Statistics confirmed that in the first half of the year Romanias economy saw a sizeable contraction, as did many European economies and economies in other parts of the world. It is hard to believe that by the end of the year things will improve to such an extent as to lead to a year-end contraction of under 4%, as the government forecasts, because we have to make up for a 10% drop. This is by no means easy, given that the fears that keep the economy on hold are still considerable, and that the European economy and the economies of Romanias key partners, first of all of Germany, are not likely to bounce back very quickly, in spite of some signs of recovery. So for the entire year, Romanias GDP might drop by a total 5-6%.

In the same context, an analysis run by the National Statistics Institute shows that over one-third of Romanian households have had difficulties, or even serious difficulties, meeting current costs of living, and if we add those who admitted slight difficulties in covering these costs, we get a total of 77% of the families in Romania. According to the survey, only for one in five households current expenses do not raise any special problems. More than half of households say the incomes required for covering current expenses should be over 600 euro, the survey also indicates.

(translated by: A.M. Popescu)