BR Analysis. Romania’s trade gap risks turning from bad to terrible this year after a 62 percent increase in January

Sorin Melenciuc 12/03/2019 | 11:36

Romania’s trade gap rose by 62 percent year-on-year in January up to EUR 1.26 billion, the highest first-month trade deficit in 11 years, due to weak exports and surging imports, and experts warn that the country’s trade gap risks turning from bad to terrible this year.

Romania’s exports of goods increased by 1.6 percent year-on-year (the slowest pace since April 2017) in January to EUR 5.51 billion but were largely outpaced by imports which rose by 9.2 percent to EUR 6.77 billion, government data showed on Tuesday.

The trade gap rose by 62 percent up to EUR 1.26 billion, the highest first-month level since January 2008.

Analysts warn that this poor performance could have a severe impact on the economy.

„At EUR 1.26 billion, the trade gap in January is the largest January deficit since 2008. At this pace, the 2019 trade gap could turn from bad to terrible,” ING Bank analysts said in a research note.

„On the imports side, we can see that the share of fuel has increased (while decreasing on the export side), likely due to the cap on gas prices enacted by 114/2018 government emergency decree (the same one which included the bank levy),” they added.

This poor performance comes after a fast acceleration of the trade gap during the last couple of years.

Last year, Romania’s exports of goods increased by 8.1 percent to EUR 67.7 billion while imports rose by 9.6 percent to EUR 82.9 billion. The trade gap rose last year by 17 percent up to EUR 15.1 billion, the highest level since 2008.

In 2017, Romania’s trade gap surged 30 percent to EUR 12.96 billion, as the government adopted during the last few years a strategy of wage-led growth, stimulating household consumption and GDP growth rates.

But this model has generated larger fiscal and current account deficits and experts insist Romania should change the economic model in order to obtain real long-term economic and social development.

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