Romania: Import buying spree means weaker leu

Our expectation that the acceleration in non-food retail sales would translate into a widening of the trade deficit has been confirmed: 45.2% year-on-year after two months. Exports increase by 4.8% in January-February from a year ago, while imports jumped by 10.1%. The trade balanced widened to over 1.1% of GDP after just two months. On a 12-month rolling basis, the pace of widening in the trade balance remained flat at 18.9% YoY, with manufactured products ex-autos responsible for almost half of it.

The Romanian leu is stable but on borrowed time. The cost of borrowing is relatively excessive. Needless to say, the more time that's borrowed, the sharper the future correction. A sensitive electoral period is likely to delay the rebalancing.