Romania’s CA deficit doubles to 2% of GDP in Jan-Apr

Romania’s current account (CA) deficit more than doubled (+107%) in the first four months of this year, compared to the same period of 2020, to EUR 4.71 bln - or the equivalent of some 2% of the year’s projected GDP. But this was only another effect of the volatile developments during and after the pandemic crisis - parallel by stop and go cycles in both real and financial sectors.

While acknowledging the significant increase of the deficit in the country’s trade with goods (a structural issue not addressed yet), the doubling of the CA gap reflects in part the deferred registration of FDI companies in Romania - which, under BOP6, are counted once as outflows (under the primary income accounts) and again as FDI (under capital and financial account).

The volume of reinvested earnings in January-February this year rose to EUR 1.63 bln from EUR 242 mln in the same period last year.

Needless to say, the bulk of the money stands not for the profits generated by the companies during the crisis - but for their deferred gains (under a facility extended to companies last March with the aim of avoiding systemic liquidity problems).

In the CA structure, the outflows under the primary income account turned from EUR 2.47 bln in January-April 2020 to EUR 3.60 bln in the same period this year. The inflows under the secondary income account (including transfers from the EU budget) have surprisingly decreased from EUR 1.77 bln to EUR 1.74 bln.

(Photo source: Dreamstime.com)