MF: More activity in industry, decreases in the HoReCa sector, growing trade deficit

The national economy was characterized in the first semester of 2024 by a moderate growth in the food and industrial sector, a decrease in activity in the HoReCa sector and a growing trade deficit, according to the Half-Yearly Report prepared by the Ministry of Finance. The cited document shows that, at the same time, inflation decreased significantly due to government measures, the retail sector registered robust growth, investments in agriculture and forestry had a positive evolution, and the use of European funds continued, albeit at a slower pace. slow compared to previous years.

From the data in the report, we note that the food industry in our country registered a significant increase of 7.4% in the first six months of 2024, an evolution also supported by the 15% increase in production in the chemical industry between January 1 and June 30. The increase in chemical production had a positive impact on other industrial branches, thus strengthening the performance of the food sector.

On the domestic market, sales of food products increased by 4%, which reflects moderate growth compared to the rest of the commercial activities in Romania. However, this growth was slower compared to the rest of the economic sectors, indicating a somewhat more moderate evolution of domestic demand in the food sector.

Another significant aspect of the economy in the first semester is the 1.6% decrease in the activity of hotels and restaurants (HORECA), a setback that contributed to the 1.5% reduction in the total volume of turnover from services provided to the population. This decline can be associated with both internal and external economic factors, such as a reduction in the number of tourists or changes in post-pandemic consumption behavior.

One of the positive aspects of the economy in the first half of 2024 was the downward trend in consumer prices across the entire production and distribution chain, with inflation registering an average rate of 6.2%, 6.6 percentage points lower than in the first half of 2024. half of 2023. This disinflationary process was determined by government measures to cap trade markups on basic food products and electricity and natural gas prices. The drop in inflation was particularly felt at the level of food prices, which decelerated to a growth rate of 2.9%.

An economic sector that experienced an increase in activity in the first half of the current year is retail trade, excluding motor vehicles and motorcycles. According to the data from the cited report, this economic sector registered an increase in turnover of 8% between January 1 and May 31, 2024, compared to the same period of the previous year. In particular, food, beverage and tobacco sales increased by 3.5%, thus contributing to this robust growth in the retail sector.

• 22% reduction in exports of agri-food products

The cited document states that exports of agri-food products to markets outside the European Union have decreased significantly, by over 22%, which has led to a slowdown in the overall dynamics of total exports to these markets. Data from the report shows that in the January-June 2024 period, total exports fell by 2%, compared to a 5.4% increase in the same period in 2023. This drop in exports contributed to a deepening of the deficit commercial trade in food and live animals, which reached 2.4 billion euros, exceeding by 540.7 million euros the level recorded in the same period of the previous year. It is important to note that this trade deficit was generated entirely by intra-Community trade.

The officials of the Ministry of Finance mention that in the first half of 2024, expenditure on subsidies totaled 9.06 billion lei (0.5% of GDP), being 1.3% higher than in the similar period of the previous year. The degree of realization of these expenses was 94.8%, with most of the funds being allocated to the agricultural sector, transports, and for compensating the consumption of electricity and natural gas by non-domestic consumers. Also, expenses for projects financed from non-reimbursable external funds totaled 24.48 billion lei (1.4% of GDP), 2% lower compared to the same period in 2023, reflecting a slowdown in the use of funds from the financial framework 2014- 2020.

In terms of subsidy expenditures, there is a 5.6% increase in net investments made for the establishment of vine and tree plantations, as well as for afforestation, compared to the same period of the previous year. We mention that our country has allocated a total ceiling of 19.19 billion euros for Common Agricultural Policy (CAP) in the period 2021-2027, of which 5.20 billion euros are earmarked for rural development and fisheries. Budgetary execution on this chapter, up to 30 June 2024, was relatively modest, with direct payments of euro1.7 billion but no significant repayments.

Regarding the previous financial year (2014-2020), the central authorities are still making payments, with a budget execution of euro500 million in 2024 and a total of euro9.57 billion for rural development and fisheries funds. We show that our country has almost completely used the allocations from the European Agricultural Guarantee Fund (EGF), with an execution of 14.19 billion euros in the period 2014-2024.