A pause followed by a rebound

August 2011

NICOLAIE ALEXANDRU-CHIDESCIUC - Chief Economist VLAD MUSCALU - Economist ING BANK N.V. AMSTERDAM - BUCHAREST BRANCH

 

The link between currency, exports and growth

External trade has cushioned GDP during the contraction

The external trade balance has supported economic activity over the past couple of years of economic adversity. It provided a positive contribution of more than 6ppt in 2009 when GDP dropped 7.1% (see chart 1), while last year it cushioned the blow dealt by the needed fiscal reform (see chart 2).

Two years ago it was the faster import than export contraction which had a positive impact on GDP, while in 2010 the growth driver was the export side. The latter provided one of the largest contributions seen over the past 10 years.

This is not only thanks to road vehicles

Nonetheless, even after removing road vehicles (category which includes vehicle parts) from the total exports, the remainder shows Romania’s performance has been superior to the ones of CE3 countries looking at the growth of share in total EU exports in the last couple of years (see chart 4). The advantage of Romanian road vehicles is related to their competitive price and it is likely that the same factor is supporting other goods. Such price advantages of Romania should continue to prove favourable going forward.

Romania’s exports grew faster than the ones of regional peers

Romania’s export growth outpaced the ones of neighbouring peers (see chart 3). Exports were supported by sales of electrical equipment and benefited from strong sales of road vehicles. The price advantage of Dacia’s Renault cars wasamplified by car scrap schemes implemented in many countries and, at the same time, the strong performance of Dacia supported the development of the horizontal industries.

 

Romania’s export recovery was driven by Eurozone demand

Exports to Eurozone countries were the driver of Romania’s export recovery

In spite of growth in our trading partners from outside the Eurozone, it was exports to Eurozone countries which pulled Romania’s external sales in 2010 past their 2008 peak. Germany and France saw the largest increase in the share of Romania’s exports.

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