Romania’s fob/cif trade gap expanded by 16.7% y/y in 2018, the slowest pace in the past four years. Nonetheless, the gap hit €15.1bn, which was nearly 8% of the year’s GDP.
Measured in FOB/FOB terms, not including some costs related to imports (insurance, transport), the gap was only €11.7bn, but this was still triple the deficit in 2014 and more than 6.1% of GDP. Imports increased faster than exports for the fifth year in a row, driven by fiscal stimulus that surfaced in households’ superior incomes.
Imports increased by 9.6%, to €82.9bn in 2018(cif terms). Exports rose at a robust rate of 8.1%, to €67.7bn , but this was still insufficient.
When it comes to shorter-term dynamics, the imports rose in line with the year’s average, namely by 9.6% y/y, in Q4, when exports advanced by only 5.1% y/y.
The state forecasting body CNSP expects exports to remain strong and keep rising at annual rates of over 8% per annum in 2019-2022. The economic slowdown in Europe might result in slower exports, while imports (seen by CNSP as rising by more than 9% per annum in 2019-2020) depend on the continuation of the fiscal stimulus. The exchange rate correction, if of significant magnitude, could heal the chronic external deficits that resulted in a Current Account gap that “can be financed, but is at [the upper] limit,” in the words of National Bank of Romania governor Mugur Isarescu, namely around or slightly over 4% of GDP.