Romania’s CA deficit rises five-fold in February

Romania's current account (CA) deficit rose to EUR 1.46 billion in February 2021, more than five-fold compared to the same month in 2020, according to data published by Romania's National Bank (BNR).

The unusually wide CA gap in February, 53% above the monthly average in the previous 12-month period that includes the lockdown episode marked by wide trade deficits, resulted from a combination of factors.

The trade deficit with goods explains roughly half of the CA gap deterioration since it soared to EUR 1.88 bln in February 2021 from EUR 1.28 bln.

This didn't come as a surprise after the statistics office INS reported the foreign trade numbers for the month. The net exports of services (just over EUR 0.7 bln in February and one year earlier) offset part of the net import of goods - but a smaller part of a bigger deficit this year.

The balances of both the primary and secondary accounts turned negative this February: EUR 53 million and EUR 232 mln, respectively. While Romania's primary income balance is typically negative (outflows of interest and foreign investors' dividends), the secondary income balance is typically positive and significant thanks to the transfers from the European Union's budget.

It remains unclear whether the record CA balance in February (the second-biggest one since September 2008) reflects a pattern - rather not - but it points to the urgent need for funds from the European Union's budget, or else a Balance of Payment correction intermediated by exchange rate becomes unavoidable.

The net foreign direct investments (FDI) in Romania, in February, reached EUR 122 mln, just over a quarter of the FDI in January.

In February 2020, the flow of FDI (EUR 243 mln) went from inside to outside as the FDI companies were returning loans to parent groups.

(Photo source: Pexels.com)