Romania’s trade gap narrows by 1.5% y/y in Q1

Romania’s trade deficit (goods only) narrowed by 1.5% y/y to EUR 6.7 billion in Q1, marking the fifth consecutive quarter of negative annual dynamics, according to data published by the statistics office INS.

Subdued industrial activity and lower imports of automobiles (a significant foreign trade item) due to weak sales driven by delayed government-backed schemes contributed to this improvement.

The decrease is marginal in nominal terms, but in the context of a still significant GDP deflator, the trade gap-to-GDP ratio may demonstrate a steeper decline, signifying faster improvement in the country’s external balance. To what extent this is sustainable or confirmed by further data remains unclear, as private consumption tends to strengthen throughout the year.

Romania’s trade gap peaked at 11.9% of GDP in 2022 and improved to 9.2% in 2023.

The smaller trade gap in Q1 was achieved amid less intense trade activity, consistent with the subdued industrial activity in Romania and across Europe, and in this regard, may not necessarily be good news.

Thus, the exports decreased by 3.7% y/y to EUR 22.9 billion in Q1, while the imports narrowed by 3.2% y/y to EUR 28.4 billion.

Notably, filtering out the effect of mineral fuels, Romania’s trade deficit narrowed by 4.8% y/y to EUR 5.5 billion as the exports decreased by only 1.8% y/y to EUR 23.0 billion while the imports dropped faster, by 2.5% y/y to EUR 27.5 billion.

At the same time, Romania’s net import of mineral fuels expanded by 18.6% y/y to EUR 1.16 billion in Q1.

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