Romania January-July current account deficit nearly doubles
BUCHAREST (Reuters) – Romania’s current account deficit almost doubled to -8.97 billion in the first seven months of the year over the same 2006 period as strong imports continued to widen the trade gap, central bank data showed. The trade imbalance has deteriorated sharply since Romania joined the European Union in January, due to the removal of import taxes with member states and vast leu gains earlier this year. «We have had a credit crunch globally and Romania is dependent on bank lending to finance its current account deficit,» said Lucy Bethell, currency strategist with the Royal Bank of Scotland. Official estimates see the gap reaching 11.5 percent of gross domestic product at the end of this year, against 10 percent in 2006, but analysts expect it to grow further. «We expect the external shortfall at 14.5 percent of the gross domestic product at the end of the year, clearly with the risk to exceed that level,» said ING Bank Romania senior economist Ciprian Dascalu. Imports rose 28.6 percent to -26 billion on the year in the first seven months, while exports grew 12.4 percent. Foreign direct investment remained low as a percentage of the deficit, underlining Romania’s increasing difficulty in finding cash to offset hard currency outflows from trade. By the end of July, FDI worth -3.47 billion covered roughly 39 percent of the current account gap.
