Romania’s CA deficit widens to 6.7% of GDP at end-Jul

Romania’s current account (CA) deficit, namely the outflows the country must cover from foreign direct investments, borrowing, or from its own forex reserves, has widened by 69% YoY to EUR 9.06 bln in January-July, the National Bank of Romania (BNR) announced.

Based on detailed data reported by the central bank, the 12-month rolling CA gap (Aug-20 to Jul-21) has increased by 52% over the previous 12-month period and reached EUR 15.13 bln, or 6.7% of the country’s GDP in the latest four-quarter GDP figure (as of Jun-21).

The annual growth rates, both the 69% YoY reported for Jan-Jul by BNR and the 52% YoY compiled for the rolling 12-month period, reflect in part the low base formed during the lockdown period - when the country posted smaller CA gaps as the foreign trade was disrupted.

The post-lockdown revenge spending (spending above normal levels due to deferred expenditures) might have played a role as well in the high CA gap readings recently.

Nevertheless, the lockdown only slowed down temporarily the deterioration of Romania’s external balance.

Compared to the Jan-Jul 2019 (before the crisis), the CA gap increased by 43%, at an annualised rate of nearly 20% p.a.

Similarly, the 12-month CA gap accumulated in Aug-20 to Jul-21 soared by 38% compared to the 12-month period ending July 2019, at an annualised rate of 17.5% p.a.

Over the same two-year period, the nominal GDP expressed in euros edged up by only 6.4% YoY or 3.1% p.a.(to EUR 226.6 bln as of Jun-21) - a rate dwarfed by the high double-digit growth rates boosted by the CA gap.

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