Romania: Current account from bad to worse
The current account (C/A) deficit reached EUR8.7 billion after 11 months of 2018, 60% higher than during the same period of 2017
November 2018 data didn’t bring much of a change in terms of the factors driving the C/A deficit. What was bad is now worse. In particular the goods trade balance remains deep in negative territory, at EUR-13.2 billion, or 6.5% of GDP for the entire January-November 2018 period. The surplus on the services side has shrunk in both nominal and relative terms, coming in at EUR7.5 billion, or 3.7% of GDP.
Current account breakdown after 11-months, as % of GDP
On a 12 months rolling basis, the total external position dipped further into negative territory, at EUR-1.6 billion. Foreign direct investments (FDI) diminished for the third consecutive month, coming at a meagre EUR294 million in November 2018. Capital inflows remained rather sluggish. FDI coverage of the C/A deficit is now 55%.
External position goes further into negative territory
FDI coverage
After today’s data, our 4.2% forecast for the C/A deficit for the entire 2018 is clearly unobtainable, with the deficit already touching 4.3% after 11-months. December is likely to add another 0.3-0.4 percentage points to this. The recent weakening of the Romanian leu could help the rebalancing process, but this will not be a panacea for the economy. Increased absorption of EU funds, fiscal consolidation and boosting FDI would definitely be a more successful remedy.
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Download
Download snap