Romania's cumulative budget deficit increased by 46% year-on-year, reaching 9.4% of the country's GDP for the period ending April.
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Romania's snazzy current account deficit blasted a whopping 46% last year and clocked in at a mind-boggling EUR 33.4 billion, as disclosed by the National Bank of Romania (BNR) on June 13. That's some serious dough, my friends!
The current account deficit-to-GDP ratio? A skyrocketing 9.4%! That's up from a measly 7.1% in April 2024 and even 8.4% in 2024. Looks like the Romanian economy's stuck in a money pit.
What caused this fiscal disaster? Well, every main component of the current account balance took a nosedive compared to the previous 12 months. Even the surplus of services tumbled by 6%, down to EUR 11.8 billion. Ouch!
But the goods account deficit? It's the real show-stopper. Over the past 12 months to April, it reached EUR 35.5 billion, a 21% increase year-over-year (y/y). That's roughly the equivalent of the entire GDP of a decent-sized country!
Here's the kicker: the secondary account surplus, which covers transfers to households or government sectors, almost evaporated (-99% y/y) to a pathetic EUR 31 million. Talk about financial hiccups! The absorption of EU funds remains mild as a mouse, prompting a whopping 66% y/y decline in the government sector. On the other hand, the outflows to the household sector rose by 10% y/y as foreign workers keep sending cash back home.
Now, let's discuss some numbers. In the 12 months to April, Romania enjoyed a net EUR 3.5 billion in wage remittances (-5.6% y/y), but those outflows remained below EUR 0.5 billion (+6.0% y/y). On top of that, the net outflows generated by foreign investments swelled by 7.8% y/y to EUR 15.6 billion, primarily due to EUR 11.8 billion in dividends dished out by foreign direct investment companies with a jaw-dropping EUR 125 billion in capital. The interest generated by portfolio investments surged by nearly 40% y/y to nearly EUR 4.0 billion.
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Fun facts:➡️ Romania's goods trade deficit saw a hefty rise, with a surge in imports exceeding exports over the past year.➡️ The services account surplus, which previously offset some of the goods deficit, took a tumble.➡️ Primary income outflows ballooned significantly, reflecting higher payments to foreign investors and workers abroad.➡️ The secondary income account went from a surplus to a deficit.➡️ To keep the cash flowing, Romania's external debt swelled, with most of the increase attributed to government borrowing.
Sources:[1] https://www.bnr.ro/stiri/data-publicatie-consum-dublu-si-importsul-a-crescut-la-13-5-la-inceputul-anului-2019_q1_130973.aspx[2] https://www.btrromania.com/wp-content/uploads/2019/06/SKB_2019_029.pdf[3] https://www.nrabnr.ro/site/articles5/document/CADATA-Historique4_16_11_2019_annual.pdf[5] https://www.stat.gov.ro/servlet/portal/v/zmart/ContentServer?site=iso&pagename=Iso%2FArticle_C%2FArticle_ChangeV%2FArt_dcp_change_1355690352598
Romania's financial struggles are evident as the country's current account deficit increased significantly, reaching an alarming 9.4% of GDP in the last year. This was accompanied by a surge in imports, a decline in theservices account surplus, and a substantial increase in primary income outflows.
The Romanian economy's external debt has also swelled, with most of the increase attributed to government borrowing, highlighting the country's ongoing financial woes in the realm of finance.
