Romania’s imports soared by 16.7% y/y to €7.1bn (CIF terms) in October and marked the maximum level in recent decades, according to data released by the statistics office. The state forecasting body expects much slower growth rates in 2018 (8.7% y/y on average) but the actual dynamics might be even weaker, which would have a positive impact on the trade balance.
Labour market conditions have visibly fuelled imports recently. Aggregate wages earned by households in the rolling 12 months ending October increased by real 17%, fuelling the consumer exuberance: non-food retail sales surged by nearly 18% y/y in September and October, marking new records.
A large part of the non-food goods purchased in Romania (such as electronics, clothing and footwear, automobiles) are imported. The rising crude oil price also contributed to the higher imports in 2017, particularly as Petromidia Refinery (the country’s largest) is operating at high capacity. The rise of the imports of fuels (10% y/y in January-October) contributed nearly one-third to the rise in total imports.
The FOB/CIF trade balance widened by 35% y/y to €1.3bn in October. The rolling 12-month FOB/CIF trade gap widened by nearly 25% y/y to €12.3bn (6.8% of GDP) as of October. The FOB/FOB trade gap soared by 29% y/y to 5.1% of the year’s GDP, a ratio that is still within the limits of sustainable deficits but still rising fast.
Imports in the 12 months ending October increased by 12.0% y/y to €74.3bn, reaching the highest annual growth in more than five years. The state forecasting body expects 2017 imports to be 11.5% up y/y at €75.1bn. It also envisages a slower rise of imports in the coming years: 8.7% y/y in 2018 and even slower in the years to come.
There are grounds to believe consumption, hence imports, will moderate even more. The CNP forecast a 6.2% y/y increase in households’ consumption in 2018, after a 8.5% y/y advance in 2017. The dynamics of imports will consequently lag behind the CNP’s projections. The CNP projections are consistent with 5.5% GDP growth while independent projections put the growth rate at lower rates (3.1% in some cases).
Short-term sales and imports data do not indicate consumption is already losing momentum, but the tighter income policy pursued in the budgetary sector (compared to the repeated wage hikes seen in the past couple of years) and the problems faced by private companies hit by still unpredictable amendments to fiscal regulations are expected to result in a sharp deceleration of household earnings. Consequently the consumption rally will likely moderate, with an impact on imports.
|Foreign Trade ( €mn )||2012||2013||2014||2015||2016||Q4 16||Q1 17||Q2 17||Oct-17|
|Source: INS, BNR, *estimates|