Romanian economy grows 8.2 pct in Q1

Publish date: 02-06-2008
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The Romanian economy expanded by 8.2 percent in the first quarter, outstripping market forecasts for 6.4 percent growth as consumption and real estate spending showed no signs of slowing, data showed on Monday.

Gross Domestic Product grew by 6.4 percent in the last quarter of 2007 and by 6.1 percent in the first quarter of that year.

Evidence of continued strong demand is likely to add to pressure on the central bank, which is already struggling to contain resurgent inflation, analysts said.

"The economy shows no signs of slowing down ... excess demand continues to exist ... We need restrictive economic policies," said Ionut Dumitru, head of research at Raiffeisen Bank in Bucharest.

The Romanian economy has grown robustly in recent years, propelled by foreign investment and strong consumption as local companies modernise and Romanians seek to improve their living standards.

But the consumption-driven expansion, accompanied by fast credit growth, has fanned worries about economic overheating.

In particular, analysts warn about Romania's double-digit current account deficit, which could raise the spectre of financing problems if global capital flows were to dry up.
A detailed breakdown of the growth figures will be available on June 5.

The Romanian leu rose against the euro after the data release, hitting its highest level since April 25 at 3.5970 per euro.

"The data is very good. It means interest rates have room to go even higher," said one dealer with a foreign bank.

Analysts surveyed by Reuters in May expected the economy to grow by 6.5 percent this year. Finance and Economy Minister Varujan Vosganian recently estimated gross domestic product could rise to around 7 percent. (Reporting by Luiza Ilie and Radu Marinas; Editing by Chris Pizzey

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