Romania’s current account balance remained in the positive area at the end of May, posting a surplus of EUR 314mn, equivalent to more than 0.2% of GDP, according to central bank data. The surplus in Jan-Apr was only EUR 55mn and it actually improved robustly in May. While the CA dynamics is mainly driven by the foreign trade, the marginal improvement in the EU funds absorption helped to the sharp improvement in May.

The CA gap in the rolling 12 months decreased to EUR 2.55bn at the end of May – or 1.9% of the full-year GDP, from EUR 3.56bn a month earlier. The deficit narrowed to 3.9% of GDP in 2012 from 4-5% 2009-2011. It shrank in a first BoP correction episode in 2009 after hovering in the double-digit area for the three years before the recession [2006-2008].

Compared to the same period last year, the country’s CA balance improved by EUR 2.6bn in Jan-May – starting from a deficit of nearly EUR 2.3bn. Out of the EUR 2.6bn total improvement, EUR 2.3bn was prompted by the recovery in the balance of trade with goods and services from a deficit of EUR 2.77bn to a gap of only EUR 0.5bn. Fewer outflows under the incomes account contributed another EUR 0.5bn to the overall improvement in the CA balance. Only the current transfers had a negative impact on the CA balance – since their surplus diminished slightly by EUR 179mn.

In May alone, the CA balance improved radically from a deficit of EUR 747mn to a surplus of EUR 259mn. Out of the total EUR 1bn improvement, EUR 0.45bn was driven by the foreign trade with goods and services. Notably, the current transfers also had a positive contribution to the overall CA’s annual dynamics as the inflows under the EU-funded programmes improved slightly.

Foreign direct investments kept shrinking as non-residents’ direct investment in Romania were EUR 414mn in Jan-May, compared to EUR 656mn last year. Of the total foreign investments, intragroup loans amounted to EUR 329mn. The remaining EUR 85mn was equity stakes plus the net loss of FDI companies in Romania.