SIMILAR ARTICLES

Historical record for trade deficit, in July 2019. We also moved to monthly deficit both in transport machinery and equipment

The trade deficit in July 2019 rose sharply to the historical record of EUR 1,755.5 million, by 38% more than in the same month of… Mai mult

Denmark, a country almost entirely digital. Interview with Rikke Zeberg, director general of the Danish Agency for Digitisation

First steps towards digitalization were made in the 60s. More recently, twelve years ago, the digital ID was introduced for all the citizens, for free.… Mai mult

Romanian companies keep up with state: investments decline by half compared to 2009

Both public and companies’ long-term investments halved in 2018 compared to 2009. This is proof that without state investments, the private sector does not have… Mai mult

Increasing trade deficit, in an increasingly difficult European context: in all other states it is the opposite

Romania is the only country in the region where results in the first half of this year in foreign trade worsened, according to data published… Mai mult

Draft law: Tax regime for foreign companies’ profits obtained in Romania is changing

The Ministry of Public Finance (MPF) will propose to the Government another emergency ordinance for amending the Tax Code and the Tax Procedure Code, after… Mai mult

Cronicile

Trade deficit – over 50% growth, one quarter to the next: Phenomena, consequences

de Marin Pana 28.8.2017

The trade deficit in the second quarter of 2017 was EUR 3,520.7 million, according to the data provided by the INS, which shows a spectacular increase by about 52% compared to the first quarter of the current year.

Moreover, in June, the highest monthly trade deficit has been reached, of nearly EUR 1.4 billion or almost 40% of the entire quarter.

Worryingly, while the growth rate of imports remained unchanged at the middle of the year compared to the end of the first quarter of 2017, respectively 12.4%, exports slowed down visibly and the result related to the beginning of the year declined from 11.5% to 9 6%. This shows a trend that should give food for thought to decision makers and affects the macroeconomic balances.

The coverage ratio of imports based on exports decreased from 90.7% in the first quarter to 87.7% in the first semester.

It is a notable poor performance after the good level achieved in 2014 and we are heading (much too fast) to the levels of the time when we were trying to get out of the economic crisis (see the table).

*

  • The import coverage ratio between 2009-2017
  • Year
  • Coverage ratio FOB/FOB
  • * at the end of 1st semester

*

After exceeding the EUR 1 billion level in March, the monthly trade deficit is heading for a new threshold, of EUR 1.5 billion, which is very likely to be reached following the recent wage and pension increase measures. Both with an annual increase rate of nearly 15% compared to an economic growth that will be somewhere around 5%.

At a 3 to 1 ratio of the income growth to the economic growth, it is very difficult for the domestic production to instantly connect and provide an appropriate offer.

This also explains the shift in consumption to the imported goods once the level of 1,000 euro per month in terms of wage purchasing power has been easily exceeded and the pensions have been arbitrarily increased by 9% in the middle of the year.

The state of play of the foreign trade evolution between January 2016 and February 2017 is as follows:

*

  • Foreign trade evolution January 2016 – February 2017
  • Month  export Import  Balance

*

Situation by destinations

Trade with the EU countries amounted to EUR 23.48 billion in terms of export (with a share of 76% in total exports) and EUR 27.84 billion for imports (75.8% of total imports).

On the extra-community trade side, exports registered amounted to EUR 7.40 billion (24% of total exports) and imports EUR 8.88 billion (23.8% of total imports).

*

  • Foreign trade structure in H1 2017 (mn euro)
  • Export import Surplus/Deficit Share of deficit
  • Intra-EU28 trade
  • Extra-EU28 trade
  • Source: INS, own calculation

*

While the shares in Romania’s foreign trade structure remained relatively constant, about three-quarters in relation with the EU member states and one quarter in the non-EU segment, it should be noted a certain faster growth of the trade deficit in the second quarter in relation to the non-EU countries (almost + 60%, one quarter to another, compared to “only” 50% in relation to the EU countries).

Beware of the exchange rate

In other words, we are witnessing an increased loss of competitiveness in relation to the segment outside the EU compared to the situation not good at all in relation to our colleagues from the same economic bloc. And that in the context of a relative devaluation in relation to currencies such as the zloty or forint from the non-euro part of the EU as well as to euro. The devaluation that has not helped us against the depreciation of the US dollar, which has decreased the price of commodities contracted in this currency.

  • Evolution of the exchange rate in S1 2017 (lei)
  • Month December 2016          June 2017
  • Zloty
  • 100 forints
  • Euro
  • Dollar

All in all, the end-of-year situation does not look so good if we fail to quickly get out of the ever-growing trend of strengthening the trade deficit at a higher level than the one-billion-euro monthly benchmark.

To clarify its size, it should be noted in this context that Romania’s total GDP would be estimated around EUR 180 billion in 2017 and the trade deficit at the middle of the year was 3% of GDP and leads to 7% of GDP.

We recover some of it from the service sector but the rest must be financed by foreign investment if we want to maintain the exchange rate. So, with the deterioration of the trade balance, we become increasingly vulnerable to the revenues from services (beware, more than half comes from transportation!) as well as to the availability of others to invest here.

Mergeți în homepage ›

Publicat la data de 28.8.2017

Lăsați un comentariu


NEWS

Top 3 reasons why young people leave Romania

Lack of trust in authorities, corruption and low living standards are the main reasons why young people leave Romania. The data is part of a… Mai mult

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult

"At a distance from books": 85,000 teachers (one third of educational staff) are graduates of distance learning

Approximately 85,000 teachers are graduates of distance learning (ID) programs, Education Minister Ecaterina Andronescu said at a meeting with school inspectors from Caras-Severin County. The… Mai mult

Mugur Isarescu: We should make a film for Viasat History about treasure in Moscow

A book should be written or a movie should be made and sent to Viasat History about a treasure evacuated to Moscow, as it is… Mai mult