Romania’s current account deficit surges by 57% y/y in Q2, hits 7.5% of GDP in past 12 months

Romania’s current account (CA) deficit widened by 34% y/y to EUR 12.2 billion in the first half (H1) of 2024, according to data published by the central bank (BNR).

The CA has deteriorated particularly fast in the second quarter (Q2): +57% y/y to EUR 8.1 billion.

On a longer-term perspective, the CA in 12 months to June increased by only 13.3% y/y to EUR 25.7 billion and accounts for some 7.5% of GDP – the same as one year earlier. Stronger net import of goods was the main element, but the higher sums spent by Romanians for holidays abroad and a more expensive external debt also added to the overall picture.

The rolling 12-month CA deficit expressed as a ratio of the period’s GDP peaked at 9.5% in Q3 2022 as the country was facing high natural gas (and other commodities) prices in the period after the emergence of the war in Ukraine, but eased to 6.6% one year later to reverse the trend meanwhile.

The main element of Romania’s CA remains the trade with goods, where the deficit increased by nearly 30% y/y in Q2 (to EUR 8.5 billion – exceeding the CA’s EUR 8.1 billion gap), by 14.2% y/y (to EUR 15.0 billion) in H1 and remained constant in the rolling 12-month period (+0.1% y/y to EUR 30 billion compared the CA’s EUR 25.7 billion deficit).

Romania’s surplus in the trade with services, propped by the robust export of IT services, has deteriorated by 10% y/y (to EUR 3.1 billion) in Q1, by 15% y/y (to EUR 6.1 billion) in H1 and by 14% y/y (to EUR 12.4 billion) in 12 months to June 2024. The rising import of tourism services was the main element behind the deterioration in the country’s balance in the trade with services, while the export of IT services (EUR 10.3 billion in 12 months to June 2024) advanced by a very slow rate of 2.4% y/y.

The deficit of the primary incomes (flows generated by work and capital such as wage remittances, dividends, and interest) rose by 20% y/y to EUR 9.3 billion in 12 months to June 2024. Interest outflows on foreigners’ financial investments in Romania (mainly FX bonds) surged by 48% y/y to EUR 3.6 billion.

Regarding the secondary income balance, its surplus increased by an impressive 42% y/y in 12 months to June 2024, but it remains moderate: only EUR 2.0 billion for the period.

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