Romania’s current account deficit widens by 24 pct to EUR 6 bn in January-July; FDI up 22 pct

Romania’s current account balance of payment registered a deficit of EUR 6 billion in the first seven months of this year, up 24 percent compared to January-July 2018, while the foreign direct investment (FDI) rose by 22.3 percent to EUR 2.9 billion, according to the National Bank of Romania (BNR).

In January-July 2018, the current account balance of payment registered a deficit of EUR 4.86 billion.

The main source of the large external deficit is the negative trade balance.

„The deficit on trade in goods widened by EUR 2,069 million, the surplus on services income increased by EUR 436 million, the deficit of the primary income balance narrowed by EUR 720 million, and the surplus of the secondary income balance decreased by EUR 253 million,” the central bank said in a press release.

Experts expect Romania’s current account deficit to exceed 5 percent of GDP this year.

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“At EUR 1.46 billion, the July deficit was the highest since September 2008. Foreign direct investments still cover slightly less than 50 percent of the year-to-date deficit. (…) We maintain our forecast of a C/A deficit equal to 5.4 percent of GDP for 2019,” ING Bank analysts said in a research note.

On the other hand, non-residents’ direct investment in Romania totalled EUR 2.92 billion in January-July 2019, compared with EUR 2.38 billion in the same period of 2018, “of which equity (including estimated net reinvestment of earnings) amounted to EUR 2,102 million and intercompany lending recorded a net value of EUR 814 million,” BNR indicates.

This increase was “determined by the improvement of the perception of investment risk (after the European Parliamentary elections) and of the potential of the Romanian economy in the medium term (considered higher than the potential of other countries in the region),” Banca Transilvania analysts indicated in a research note.

Last year, the current account balance of payment registered a deficit of EUR 9.42 billion – or 4.7 percent of GDP -, up 57.7 percent against 2017, while the FDI rose by 2.9 percent to EUR 4.94 billion.