Romania’s CA gap narrows by 18.5% in Jan-Aug despite wider trade gap

Romania's current account (CA) gap narrowed in January-August to EUR 5.8 billion, which is 18.5% less compared to the same period last year, according to the National Bank of Romania (BNR).

This was despite the widening trade gap (particularly in the trade with goods) and to a small extent due to stronger transfers from the European Union's budget.

The net import of goods increased by 7.8% (EUR 851 million) yoy to EUR 11.8 bln in Jan-Aug putting significant pressure on the CA gap.

Subdued global tourism positively impacted Romania's CA gap, as the country is a net importer of tourism services.

Thus, Romanians spent abroad only EUR 1.85 bln in the first eight months of this year, roughly half what they spent in the same period of 2019. Overall, the tourism sector has a positive EUR 481 mln impact on the country's CA balance.

The stronger export of IT services (and unclassified services) made another positive contribution of EUR 617 mln. But nothing compares to the decrease in the outflows of direct and indirect incomes: namely the gains derived by foreign investors and the informal transfers (wage remittances) this year.

Foreign investors derived only EUR 5.3 bln down from EUR 6.8 bln incomes last year, resulting in a positive impact of EUR 1.6 bln on Romania's CA balance. On the other hand, this also led to smaller foreign direct investments (FDI).

The secondary incomes also contributed to the smaller CA gap (+EUR 542 mln contribution), again due to smaller outflows rather than stronger inflows (wage remittances, transfers from the European Union). The latter actually decreased by EUR 106 mln, to EUR 3.4 bln.

(Photo: Nuthawut Somsuk/ Dreamstime)