Romania’s current account (CA) deficit widened by 21% y/y to EUR 26.5 billion in 12 months to July, after two record monthly deficits of over EUR 3 bln in June and July, according to data published by the central bank BNR.

Instead of decreasing or at least remaining constant (at 7%) as expected by the state forecasting body CNP, Romania’s CA-to-GDP ratio increased to 7.9% in 12 months to July, from 7.0% in 2023 and 7.2% in 12 months to July 2023. 

Disappointing nominal GDP advance contributed to the higher ratio – but the trade deficit slippage (for both goods and services) and the strong outflows generated by the foreign financial and direct investments (dividends and interest) were the main drivers behind the surprisingly high CA-to-GDP ratio. The inflow of secondary incomes partly offset the wider deficits in the first two CA elements (trade and primary incomes).

Thus, the trade with goods and services posted a deficit of EUR 19.3 bln in 12 months to July, EUR 3.7 bln (24%) more compared to the previous 12-month period. The substantial net export of services eroded by 15% y/y to EUR 12.2 bln. 

Romanians spent EUR 8.85 bln (8.6% more y/y) on traveling abroad, while the incomes from tourism dropped by 8.8% y/y to EUR 4.4 bln in the 12 months to July.

The net outflows under the primary income account (net interest and dividends paid to foreign investors partly offset by the formal wage remittances) surged by 21% y/y to EUR 9.25 bln in 12 months to July. 

The dividends paid to FDI investors rose by 8.9% y/y to EUR 12 bln, and the interest paid to financial investors soared by 43% y/y to EUR 3.65 bln. The inflows under the two accounts have not exceeded EUR 600 mln.

Under the secondary income account (transfers to government and households), Romania posted a EUR 2.1 bln surplus, 52% larger compared to the previous 12-month period – still insufficient to offset a significant part of the deficits generated by the trade and primary income account.

iulian@romania-insider.com

(Photo source: Breeze393/Dreamstime.com)