Romania's exports decreased by 1.1% year-on-year to EUR 6.26 billion in October.

The annual dynamics deteriorated marginally from -0.5% in September but remained in the range that is consistent with the stabilization of the foreign trade activity under the difficult circumstances.

The lower grain crop and subsequent smaller exports alone can explain the decrease in September and October - meaning that the exports have actually increased in annual terms after filtering out the impact of the subdued output in agriculture.

Furthermore, Romania's exports reached in October the third-biggest value ever, only 1.1% below the record level reached in October 2019. The figures bode well for the October industrial output to be revealed by the statistics office on December 14.

The industrial output in the core manufacturing sector already returned to positive annual growth in September (+0.4% year-on-year).

Romania's imports contracted by 2.9% year-on-year to EUR 8.06 bln in October, reversing the unexpected 4.4% year-on-year advance seen in September.

Therefore, the 8.8% year-on-year contraction in the foreign trade gap in October (to EUR 1.80 bln) is not particularly relevant.

It can't be established where the trade balance will stabilize in the post-pandemic period, but the demand driven by the absorption of significant funds from the European Union's budget and the slow rate of import substitution by local production are likely to support relatively wide deficits over the coming years.

The European Commission expects Romania's trade gap (goods) to widen from 8.8% of GDP in 2020 to 10.1% of GDP in 2022. 

andrei@romania-insider.com

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