Signs of crisis? Romania’s exports drop for the second month in a row

Romania’s exports declined in July for the second time in a row as lower external demand and domestic troubles begin to affect the local economy.

In July, Romania’s exports of goods dropped by 1 percent year-on-year to EUR 5.84 billion – following a decrease by 5.5 percent in June, the first decline since July 2016 – and were largely exceeded by imports which rose by 5.9 percent to EUR 7.6 billion, government data showed on Monday.

Romania’s trade gap rose by 24.9 percent year-on-year in the first seven months of this year up to EUR 9.48 billion, the highest trade deficit for this period since 2008, due to weak exports and surging imports.

This drop in exports is associated with another worrying sign: the industrial production in Romania decreased by 0.6 percent year-on-year in the first half of this year.

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

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.

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.