Romania’s current account (CA) narrowed by 9.2% in October 2020, compared to the same month last year, to EUR 1.07 billion.

The main drivers were the smaller deficit in the trade with goods and services (EUR 912 mln), down by 6.0% yoy, and the stronger secondary incomes (grants and personal transfers not declared as wage remittances), which nearly tripled to EUR 381 mln.

In contrast, the balance of the net primary transfers, which include wage remittances, dividends, and interest on foreign investments, deteriorated by 61% yoy to a deficit of EUR 536 mln - mainly as a result of higher dividends paid by the FDI companies.

In January-October, Romania’s CA deficit narrowed by 2.9% yoy to EUR 8.78 bln (some 4.3% of the year’s projected GDP).

The trade deficit (goods and services) increased moderately by 3.9% yoy to EUR 7.32 bln, and the balance of primary incomes also deteriorated - yet not as much as in October alone - by 6.6% to a EUR 3.09 bln deficit.

But the strong net inflows of secondary incomes (including the grants from the EU) have balanced the wider deficits in the two main accounts.

Overall, the net transfers to Government and private sector nearly doubled to EUR 1.64 bln in January-October.

Surprisingly, however, the net transfers to the Government (mainly from the EU) halved to a dismal value of EUR 31 mln while most of the secondary transfers were to the private sector (households): EUR 1.61 bln. In the meantime, the net foreign direct investments to Romania contracted by 61% yoy to EUR 1.72 bln (0.8% of year’s GDP) in January-October.

FDI companies in Romania “reinvested” (have not repatriated) profits worth EUR 2.54 bln - but they returned EUR 1.51 bln worth of loans to their parent groups.

(Photo: Shutterstock)

iulian@romania-insider.com