Romania’s Current Account deficit hits 2.5% of GDP in H1, foreign debt rises

Romania’s Current Account deficit widened by 38% year-on-year to EUR 5.1 billion in the first half (H1) of 2019, Romania’s National Bank (BNR) announced.

The deficit, which shows the flow (outflow, in this case) of money to or from one country as a result of the trade with goods and services, payment related to production factors (labour or capital) and discretionary payments, thus already accounted for 2.5% of the full year’s projected GDP, up from 1.85% in the same period last year.

To balance the outflows under the Current Account, Romania’s external debt increased in the first half of the year by EUR 4.3 bln, to EUR 103.7 bln at the end of June. For comparison, the country’s foreign debt advanced by less than EUR 2 bln in the same period (January-June) last year.

On the upside, BNR announced that non-residents' direct investment in Romania totaled EUR 2.3 bln compared with EUR 1.8 bln in January - June 2018.

As regards the breakdown of the EUR 5.1 bln CA deficit, the net imports of goods accounted for EUR 7.6 bln, 24% more than in the same period last year. Net export of services (transport, IT) advanced by less than 3% year-on-year to EUR 4.0 bln.

The balance of primary incomes (flows generated by production factors: labour and capital) improved to a deficit of EUR 2.4 bln (reflecting the dividends and interest generated by investors’ assets in Romania) while the surplus of secondary incomes (discretionary payments: informal wage remittances, transfers from EU budget) improved more significantly by EUR 0.8 bln to EUR 1.6 bln.

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