Romania: Current account gap widens further in May
The current account (C/A) gap widened by 16% to €3.02 billion in January-May 2018 compared to the same period a year ago, driven by the trade deficit
Competitiveness issues in food industry
Despite signs of a slowdown in consumption, the trade balance on items such as food remains stubbornly negative suggesting that competitiveness issues prevail. Overall, the trade gap widened by 14.9% year on year in May, as export growth in the auto sector is levelling off while the food deficit has failed to correct.
January-May C/A balance (€m)
At €0.7 billion, the total external position still remains in positive territory. Foreign direct investments (FDI’s) picked up a bit in May but are still covering only 56% of the C/A shortfall.
C/A structure and external position
RON seems still protected
So far, there are no convincing signs of a correction in the external imbalance. We see the C/A reaching -3.7% of GDP in 2018, versus -3.4% in 2017. Despite these weaker fundamentals, the Romanian leu (RON) is somewhat protected by higher carry. Also, the central bank is unlikely to allow meaningful RON depreciation due to a high exchange rate pass-through in inflation.
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
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