Snap12 April 2019Updated one month ago

Romania: No relief from the current account

The current account (C/A) deficit widened 34% in Jan-Feb 2019 compared to the same period of 2018. The central bank is right to be worried

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At the last National Bank of Romania meeting, the issue of the C/A deficit gained more attention than usual. Board members concluded that developments are “posing a concern in terms of the sustainability of economic growth and macro-stability”. From here to seeing increased pressures on the Romanian leu as “very likely”, it is of course not a long way.

External position remains in negative territory

NBR, ING
NBR, ING

February 2019 data confirms the deterioration of Romania’s external position. The goods sector moved deeper into negative territory, to €2.3 billion after the first two months of 2019. That’s 41% more than in 2018. While 10% higher than in 2018, the surplus on the services side couldn’t offset much of the deterioration. Nevertheless, at €1.3 billion, it is still the largest services surplus ever recorded after the first two months.

On a 12-month rolling basis, the total external position remains quite deep in negative territory, at €0.9 billion.

January-February C/A balance

NBR, ING
NBR, ING

As already mentioned, we think the leu is stable but on borrowed time. A correction is overdue. With no compelling signs of adjustment in the external position, the more time that's borrowed, the sharper the future correction.