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C/A deficit widens on the back of lower remittances

Lower remittances of Romanians working in southern European countries with sovereign debt problems had negative effects on the C/A deficit in January-April.

The surplus of the net current transfers (both public and private sector) fell 61.2% y/y to EUR 604mn. According to the most recent official information, Italy has a share of 43% in remittances from abroad, Spain 31% and Greece 7%. Besides lower remittances of the Romanian workers, net current transfers were affected by lower inflows of European funds at the beginning of 2010.

C/A deficit increased by 40.3% y/y in January-April to EUR 2,060mn. After being a major concern during the economic boom, trade balance represents no longer a problem considering that the deficit shrank by 20.7% y/y to EUR 1,765mn. The evolution of the FDIs remains disappointing and they stood at only EUR 1,135mn. A full implementation of the fiscal consolidation program agreed with the IMF could increase again foreign investors' awareness of the rewarding domestic business environment.

C/A deficit is likely to stay unchanged this year at 4.5% of GDP in a scenario consistent with a further decline in the trade deficit due to the ambitious fiscal reforms. As a result, the RON could remain stable within 4.1-4.2 in the next months.

Sursa: http://www.bcr.ro

Tags: deficit remittances lower

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