Romania’s current account (CA) deficit has widened to EUR 5.17 billion in April-May 2024, when it was 77% (EUR 2.26 bln) higher compared to the same period last year, according to data released by the central bank (BNR). 

The increase was mainly caused by the wider (+EUR 1.53 bln) deficit in the country’s trade with goods, driven by the strong domestic demand mainly for private consumption. 

The country’s external balance returned in April-May to the widening trend seen in Q4 last year but interrupted in Q1 this year. The thin improvement achieved during Q1 was fully offset by the deterioration in the first two months of Q2. 

Romania’s external gap is heading (in nominal terms) towards the record deficit reached in 2022 when the entire Europe was competing for scarce sources of natural gas ahead of the first winter of the Russian invasion of Ukraine. This time, imports are driven by expansionary income and budgetary policies and by households’ restored consumer confidence.

The CA gap in twelve months to May 2024 rose by 10% y/y to EUR 24.9 bln, but it accounted for only 7.5% of GDP compared to 7.7% in the previous twelve months. 

The ratio (CA to GDP) dropped from 9.2% in 2022 to 7.0% in 2023 and is supposed to further ease towards more sustainable levels in the future.

andrei@romania-insider.com

(Photo source: George Oprea/Dreamstime.com)