Fewer holidays abroad and thinner gains for foreign investors balance Romania’s CA gap

Romania’s current account (CA) balance widened to EUR 4.86 billion in January - July, one fifth (19.5%) less than in the same period last year.

The CA gap in the rolling 12-month period eased to just over EUR 9 bln (4.5% of GDP), the lowest level since February 2019.

Before the crisis, the 12-month gap hit a maximum of EUR 10.77 bln in February 2020.

The balance of tourism (fewer holidays abroad) and that of primary incomes (lower interest and dividends earned by foreign investors) have improved the balance, particularly in March-July. Thus, the outflows of primary incomes (dividends, interest repatriated by foreign investors) shrank from EUR 4.6 bln in March - July 2019 to EUR 3.1 bln in the same period this year.

The outflows under the tourism category (services) contracted from EUR 2.2 bln in March - July last year to only EUR 0.8 bln in the same period this year.

The inflows of secondary incomes to public administration entities (mostly EU funds) increased significantly - but on a low base, from EUR 2 mln in March - July last year to EUR 570 mln in the same period this year.

The foreign direct investments (FDI) in January - July this year plunged to EUR 1.30 bln from EUR 3.35 bln in the same period last year. But a large part of the contraction was marked in January - February (from EUR 1.4 bln to negative, or net FDI outflows, EUR 0.3 bln).

The downside of fewer dividends derived by FDI investors in March - July was the weak volume of FDI in the period: EUR 1.62 bln, compared to EUR 1.95 bln in the same period last year. The contraction was not major, compared to that seen in January - February.

But the FDI in the five-month “crisis” period this year came mostly as intra-group loans extended by parent companies of local FDI companies (EUR 1.3 bln versus virtually zero in the same period last year).

(Photo: Octav Ganea/ Inquam Photos)