‘Revenge spending’ pushes up Romania’s trade gap

Romania’s imports recover faster than exports, May foreign trade data show.

This is consistent with the buoyant private consumption (retail sales) previously reported: +7.3% YoY in April (latest data available) driven by a 12% annual advance of non-food retail sales.

In May, Romania’s exports were still 5% below those in May 2019 despite the misleading +59% YoY advance - and this is still a good performance given the state of the global supply chains.

But the imports (+54% YoY) recovered fully to the levels seen two years ago (-0.3%), before the crisis.

And this can hardly be seen as a surprise since the non-food retail sales in April (latest data available) were no less than one quarter above the non-food retail sales in April 2019.

The revenge spending is visibly pushing up imports (hence the trade gap), and this at the expense of both domestic balances (demand-driven inflation) and external balances (foreign trade gap). In May, Romania’s exports rose by 59% YoY to EUR 7.73 bln.

The trade deficit widened by 41% YoY to EUR 1.77 bln. What is more important, the trade gap was nearly 20% wider than it was in May 2019. For the whole Jan-May period, the trade gap widened by over 20% compared to the same period in 2019.

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