Romania's C/A gap widens 8 times y/y in June, 12-mo gap hits 1.8%/GDP

By bne IntelliNews August 13, 2014

Romania's current account balance turned to a EUR 878mn deficit in the first half of the year from a EUR 123mn surplus in the like period of 2013, the statistics office reported on Aug 13.

The current account gap in the 12-month rolling period ending in June edged up to EUR 2.5bn [1.8% of GDP] from EUR 2.1bn [1.4% of GDP] at the end of May, according to IntelliNews calculations. A consensus forecast (based on data of the state forecasting body and on independent entities like the IMF and rating agencies) sees the country's current account gap at around 2% of GDP in the medium term.

According to our calculations, based on unrevised Jan-May data, the C/A gap has widened markedly in June - when it expanded by 7.75 times on the year to EUR 527mn.

The causes of current account balance deterioration in both cases - June alone and the full first half, are ranked by their importance: i. higher outflows under the incomes account [dividends of FDI companies, re-invested or not]; ii. certain deterioration in the trade balance with goods [higher deficit]; and iii. lower inflows under the current transfers account [weak EU funds absorption].

RISING NET EXPORT OF SERVICES. The country's traditional trade gap in the goods section is being gradually offset by the robust growth of exports of services. Gross exports of services increased by 15% y/y to EUR 5.76bn in H1. Net exports of services increased by 50% y/y to EUR 1.86bn. The gap in the trade with goods was only EUR 1.67bn for the six-month period therefore the overall trade gap for goods and services turned to surplus in the first half of 2014 [EUR 193mn] from a EUR 215mn deficit a year earlier.

The January-June data confirm the growing pattern of the country's exports of services, after in 2013 the gross exports of services increased by 22% and the net exports of services more than doubled to EUR 2.59bn [1.8% of GDP].

CA balance EUR mn 2013 2013 2013 2014 2014 2014 Balance Balance
January-June Inflows Outflows Balance Inflows Outflows Balance y/y ch. y/y ch.
Current Account 32,786 32,663 123 35,329 36,207 -878 -814% -1,001
A. Goods and Services 28,719 28,934 -215 31,277 31,084 193 -190% 408
a. Goods 23,716 25,168 -1,452 25,522 27,187 -1,665 15% -213
b. Services 5,003 3,766 1,237 5,755 3,897 1,858 50% 621
            - transport 1,769 625 1,144 2,032 663 1,369 20% 225
            - tourism and travel 460 690 -230 590 702 -112 -51% 118
            - other services 2,774 2,451 323 3,133 2,532 601 86% 278
B. Incomes 575 2,268 -1,693 509 3,481 -2,972 76% -1,279
C. Current Transfers 3,492 1,461 2,031 3,543 1,642 1,901 -6% -130
Source: BNR                

The balance for June alone was based on unrevised Jan-May data.

CA balance EUR mn 2013 2013 2013 2014 2014 2014 Balance Balance
June  Inflows Outflows Balance Inflows Outflows Balance y/y ch. y/y ch.
Current Account 5,724 5,792 -68 5,785 6,312 -527 675% -459
A. Goods and Services 4,997 5,026 -29 5,323 5,335 -12 -59% 17
a. Goods 4,024 4,210 -186 4,247 4,598 -351 89% -165
b. Services 973 816 157 1,076 737 339 116% 182
            - transport 313 118 195 388 132 256 31% 61
            - tourism and travel 84 153 -69 113 128 -15 -78% 54
            - other services 576 545 31 575 477 98 216% 67
B. Incomes 149 560 -411 82 770 -688 67% -277
C. Current Transfers 578 206 372 380 207 173 -53% -199
Source: BNR                

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