ECONOMY

Romania’s current account deficit shrinks well below target in 2002

BUCHAREST – Romania’s 2002 current account deficit probably shrank to under 4 percent of gross domestic product, well below the 5.5 percent target, fueled by rising exports, the central bank (BNR) said yesterday. European Union candidate Romania has agreed with international lenders to cut the current account deficit to 5.5 percent of gross domestic product in 2002 from a little above 6 percent in 2001. But BNR’s deputy governor, Mihai Bogza, told Reuters in an interview that the improvement would be better than expected, partly due to a rise in exports, fueled by the firming of the euro against the Romanian leu by 6 percent on average in 2002. «The euro had an unexpected and spectacular evolution against the dollar on the foreign markets,» he said. Analysts welcomed the news. «It’s a better-than-expected figure, which beats both the market and official expectations,» independent analyst Raluca Nicolescu said. Bogza said another factor in the current account deficit’s decline was the fact that part of the non-government credits, which rose by 30 percent in real terms last year, supported exports more than imports. He said estimates for 2002 show export growth in high value-added sectors such as machinery and tools, besides traditional products like clothing and footwear. Credit on the rise Bogza said he expects credit to rise by 20 percent in real terms in 2003 despite recent measures to tighten controls on lending, after the International Monetary Fund (IMF) said it was worried that banks might be overstretching their portfolios. The IMF, Romania’s main economic mentor, has been overseeing the ex-communist Balkan country’s transition to a market economy, urging the government to speed up reforms in all sectors, including the country’s underdeveloped banking system. Bogza said the new measures, effective this month, would make banks take into account clients’ financial performance, not just their credit history, when making provisions for loans. «We hope that these measures will make sure those who are worthy to take loans will get them,» Bogza said. He said the fact that credit was only at 12.6 percent of GDP showed that the banking system was still isolated from some, unreformed, parts of the economy. «Credit risk, particularly long term, is higher in an economy which is not completely restructured,» Bogza said. However, he said interest rates were likely to fall in line with inflation, while the leu was set to appreciate «by a few percentage points» in real terms in 2003 against a basket made up of 60 percent euros and 40 percent dollars. Bogza said the central bank would make fewer interventions on the interbank market, to let the market work more independently. «We would intervene only when we think there are major events on the market,» he said. Latest data show the BNR’s hard currency net purchases from the local interbank market totaled $156.3 million in December, pushing its hard currency reserves to $6.14 billion, their highest level since the fall of communism 13 years ago.