Romania's current account deficit in January-October increased by 52% compared to the same period of last year, to almost EUR 8 billion or some 4% of the GDP projected for this year.

The deficit, which has to be financed by external borrowing, foreign direct investments (FDI) or from the country's foreign exchange reserves, thus nears the levels where it can generate vulnerability to external shocks but remains well below the record 12%-14% of GDP readings in 2007-2008 ahead of the global credit crunch.

The January-October gap, however, already exceeded the 3.7% of GDP projection of the European Commission (EC), under the Autumn Forecast issued in early November. The state forecasting body CNP, under the latest projection issued in November as well, said it expected the deficit to reach 3.5% of GDP for whole 2018.

While the EC forecasts Romania's CA gap will keep widening to 4.5% of GDP in 2020, CNP sees it shrinking to 2.9% of GDP in the same year (and 2.2% in 2022).

Speaking of the CA gap in January-October, the net import of goods and services soared by 86% compared to last year, to EUR 4.84 billion, but the primary and secondary income accounts have contributed as well to the CA balance deterioration mainly because of insufficient use of funds from the EU budget (which is perhaps the best instrument that could diminish the CA gap in the coming years) and higher outflows generated by direct and portfolio investors.

editor@romania-insider.com

(photo source: Pixabay.com)