Romania’s current account (CA) deficit has widened by 26% y/y to EUR 26.3 billion in 12 months to September 2024, according to data published by the National Bank of Romania (BNR). It was a new record after the costly energy imports pushed up the CA gap in 2022 after the onset of the war in Ukraine.

The CA deficit to GDP ratio reached 7.8%, to be further revised downwards after the Q3 GDP data is released. Based on the same calculation, the ratio was 7.0% as of September 2023 (further revised to 6.7%)

The deficit itself and its widening were predominantly driven by the trade in goods: EUR 31.8 billion in the 12-month period, 9.7% y/y more compared to the previous 12-month period. 

However, the trade in goods accounted for only half of the extra CA deficit accumulated over the past 12 months (EUR 2.8 billion out of EUR 5.4 billion), while the balance in all the other segments of the current account – except for secondary incomes (transfers) – have deteriorated.

Among all, the deficit in the segment of tourism widened the most – by 34% y/y to EUR 4.4 billion. The value of the tourism services consumed by Romanians increased by nearly 12% y/y to EUR 9.4 billion, while the volume of revenues generated by Romania from tourism contracted slightly to under EUR 5 billion.

The net revenues from transport services contracted by 10% y/y to EUR 5.1 billion amid subdued economic activity in Europe, while the surplus generated by the IT industry contracted marginally (-1.6% y/y to EUR 6.1 billion) as the sector is undergoing structural adjustments globally.

The net outflows from direct investments have not increased but remained large (EUR 10.6 billion), while the net outflows from portfolio investments rose by 50% y/y to EUR 3.5 billion, marking together a significant part of the overall CA deficit. However, a significant part of the outflows generated by the FDI companies have instantly returned as reinvested earnings: some EUR 3.2 billion (-31% y/y). 

The smaller volume/share of reinvested earnings points to the risks posed to the BoP by large volumes of FDI that may generate significant outflows during periods of global volatility and risk aversion.

iulian@romania-insider.com

(Photo source: Ungureanu Vadim/Dreamstime.com)