Romania’s CA gap falls under 7% of GDP at end-Sep

Romania’s current account (CA) deficit contracted by 19% y/y to EUR 20.95 billion in 12 months to September, according to data from the National Bank of Romania (BNR).

The CA gap to GDP ratio eased to 6.9%, from 10% at the end of September 2022, but at the same level as in September 2021.

The decrease of the CA gap over the past three quarters is due to a variety of independent drivers: weaker domestic demand for consumption, lower energy prices (Romania remains a net energy importer, although it enjoys significant self-sufficiency) and lower profits reported by the foreign direct investment (FDI) companies. However, the fiscal consolidation was certainly not among those various drivers.

Romania’s external deficit closing may advance over the past couple of years faster than the government and independent analysts expect, particularly if the government pursues material fiscal consolidation.

The scenario is subject to significant upward risks related to multiple drivers with an impact on energy prices and fiscal policy during the coming electoral year.

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