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Erste Bank: Depreciation of leu supports diminution of current account deficit

Romania's current account deficit might stagnate this year, because of the weak national currency which will influence the economy's evolution, according to a report conducted by Erste Bank, the majority shareholder of the Romanian Commercial Bank (BCR).

‘'We consider that the weakened national currency supports the Romanian economy and the process of adjustment of the current account deficit. Since the beginning of the year we've noticed a significant deceleration of the current account deterioration , which shows that the current account deficit compared to the GDP might enter a stagnation stage this year (compared to the general consensus on the market referring to minor increase),analysts of Erste Bank say. The current account deficit will be partially financed by inflows of foreign direct investments, appraised at 6 percent of the gross domestic product (GDP) and the rise in the upcoming period of foreign loans, mainly in the private sector. Compared to the same period one year ago, the current account deficit widened 7.5 percent from 4.5 billion euros over January-April 2007. In the first four months of 2008, the current account of the balance of payments reported a deficit of 4.84 billion euros, according to the National Bank of Romania (BNR). The balance of payments that disfavours Romania was mainly generated by the trade balance which reported a negative balance worth 5.54 billion euros. The European Commission estimates that the current account deficit will widen this year to the equivalent of 16.1 percent of the GDP as against 14 percent of the GDP in 2007, placing Romania on the third position in the EU according to this indicator. At the same time, the National Commission for Economic Projection forecasts for 2008 a deficit worth 13.6 percent of the GDP, down as against 2007. Starting the summer of 2007, Romania has been facing periods of strong capital outflows, prompted by the concerns regarding the vulnerability of the Romanian economy and the impact of its weak currency on economy, mainly in the financial sector. The national currency gained ground, compared to the low levels registered in January, according to Erste report, the future development will be influenced by individual factors and the market's feeling. Sursa: http://www.rompress.ro

Tags: national percent erste deficit current account bnr bcr

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