Bucharest says trade gap reflects investment needs

BUCHAREST (Reuters) – Romania’s ballooning trade deficit is a necessary evil as the new European Union member races to modernize its economy, Finance Minister Varujan Vosganian said on Tuesday. The Black Sea state’s foreign trade deficit jumped 72 percent on the year to 4 billion euros ($5.40 billion) in January-March, mainly due to the removal of import taxes with member states after EU entry. «Romania’s trade deficit is not so much a mirror of internal imbalances as a source of development, it is related to the fast pace of foreign investments and public-private partnerships,» Vosganian told a financial seminar. «Only after four or five years… if the trade gap will have the same evolution, it might generate imbalances,» he said. Analysts warn the fast-growing trade gap poses a major risk for the leu, which has gained roughly 3.2 percent on the euro this year, and implicitly for inflation, which the central bank plans to keep between 3-5 percent in 2007. The minister said one solution to narrow the trade gap would be to encourage cheaper imports from outside the EU, which is Romania’s main trading partner, taking about 70 percent of exports and supplying almost 72 percent of imports.

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