Growth in spending slows down
BUCHAREST (Reuters) – Romania’s spending growth lost some steam in the fourth quarter of 2006, data showed on Friday, in an early sign of a potential slowdown in rampant consumption which has bloated the country’s external imbalance. Voracious spending is a key economic headache for the European Union newcomer as Romanians rush to improve living standards after decades of shortages under communism while companies modernize to compete within the EU. But analysts said Friday’s release of details of gross domestic product growth for last year suggest the consumption rampage may have peaked in 2006, as pent-up demand loosened. «It’s time for a slowdown in private consumption growth… to some 9-10 percent after several years of accelerated rises, as many people have had their full of purchases,» Finansbank analyst Melania Hancila said. Final consumption slowed to 11.5 percent on the year in the fourth quarter, from 12.2 percent in July-September. Both household and government spending showed slower growth. Still, consumption expanded 11.5 percent in all of 2006, up from 9.5 percent in 2005. Analysts said it was too early to say whether any slower consumption growth had an impact on January inflation in Romania when price growth slumped to a lower than expected 4 percent. With near-term inflationary impulses unclear analysts still forecast Romania’s current account to continue expanding due to an expected loosening of fiscal policy. However, analysts also said some acceleration in Q4 investment rates was a good sign that Romania’s fast economic growth – 7.7 percent in 2006 – was becoming more sustainable.
