Current account deficit triples

The current account deficit boomed in February, by climbing almost 1.28 billion euros, an increase about three times higher than the increase in February 2006, after coming under pressure from a deepening in the trade deficit. Bad news comes in terms of foreign direct investments, as well. They now fail to cover even half the deficit; therefore the balance of payments has been dependent on portfolio investments. Lastly, there was also a decline in current transfer inflows. The cumulated current account deficit for the first two months of the year amounted to 2.05 billion euros, 166% more than the same period last year. However, the publishing of these data did not affect the trend of the exchange rate, which maintained at one of the lowest levels since 2002. “Figures are a lot higher than market expectations, and the drop in current transfers, as compared with last year, is not helping at all,” commented Florin Citu, chief-economist with ING Bank. It remains to be seen if these rates will slow down in the coming months, or if there will be a correction of the exchange to match the expansion of the foreign deficit.