In 2018, Romania had a robust increase in the gross domestic product (GDP), by 4.1 % in real terms, one of the highest growth rates among the EU Member States.
While the rate of economic growth in the eurozone in 2018 was 1.8 %, Romania continued the quick real convergence process towards the level of development and wellbeing of this area. Domestic demand rose by 5.7 % in 2018, and as a part of it, final consumption increased by 4.5 %, while, against the background of higher inflation and a more restrictive monetary policy, consumption by the population tempered its increase of the previous 2 years and rose by 5.3 %.
Significantly, gross accumulation (gross investment plus accumulation of stocks) sped up to 9.6 % in 2018 (from 4.2 % in 2017). The export of goods and services saw a real increase by 5.4 %, whereas the import of goods and services rose by 9.1 %. Inside of them, the export of services increased by 8.5 % and the import of services by 14.4 %, so that the surplus from external trade in services was maintained at more than 4 % of GDP. These evolutions led to a negative net contribution of export to the GDP growth of 1.7 per cent.
In 2018, the labour market improved. The total number of employees (ILO) was higher by 1.7 % compared to 2017, while the unemployment rate was 4.2 %, with 0.7 percentage points lower than in 2017. The employment rate among the population aged 20-64 years was 69.9 %, which is only at 0.1 percentage points away from the national target of 70 % set in the context of the Europe 2020 strategy.
In 2018, consumption prices rose by 4.63 % on average compared to the previous year, due to rising prices for non-food goods (6.20 %), while the prices of food products rose by 3.75 %, and the service rates by 2.53 %. In December, annual inflation was at its lowest in 2018, i.e. 3.27 %, lower by 0.16 percentage points than in November. The increment in 2018 was due to both overcoming the statistic effect associated with the loose tax measures at the beginning of 2017 (a reduction in the VAT rate, removal of extra excise duty and some non-fiscal duties) and an increase in international quotations for oil (+ 33.1 % compared to 2017), and also for the energy group (+ 10.4 % in 2018 compared to the previous year). The nominal depreciation of the national currency – which was 1.84 % - had also an important contribution. The current account deficit in the balance of payments dropped significantly in 2018 compared to 2017, its share in the GDP being 4.5 %, in a context of a higher negative balance of goods.
Romania has one of the most rapid growth of potential GDP at European level, a growth which will be around 5 % annually in the medium-term. These estimations were made based on the European common methodology used in all EU Member States.
In the future, a significant contribution to the real growth of potential GDP is also expected from the stock of capital, from 0.6 percentage points in 2018 to 1.4 percentage points on the prognosis horizon. The labour factor has a slightly positive contribution (0.5 percentage points on average) dropping decisively as a consequence of a steady decrease in the working age population. The main limitative factor in relation to the growth potential of Romanian economy is its demographic evolution, the working age population being in 2018 less numerous by 4.7 % than in 2010. However, the negative evolution of the working age population is offset in the medium-term by an ascending trend in the rate of activity. The contribution of the overall productivity of factors to the potential growth is of 3.5 percentage points annually on average.
Source: 2019 National Reform Programme, Government of Romania.