Trade deficit balloon ready for take-off

The explosion of Romania’s trade deficit over the first five months of 2001, which reached $1.75bn in FOB/CIF prices, as compared with $790.8 million in the year-ago period, casts a doubt on the chances of containing the macroeconomic parameters at the levels anticipated for this year.

A piece of good news, though: exports are increasing in fields which seemed dormant until now, while part of the imports goes to retooling.

The imports in May outstripped exports by $484 million, up 7% since the previous month and 26% since May 2000 respectively.

After a halt in the dynamic of the exports registered in April, which had gone below the one billion-dollar threshold after four months of growth in a row, the export-related revenues rose to $980.8 million, up 23.8% against the same month last year.

Although having “mimicked” the break of exports, the imports made a more powerful comeback, jumping 15% compared with April, up to $1.46bn. Over the first five months of the year, Romania imported more than $6.4bn in goods.

Stephane Cosse, IMF resident representative in Bucharest, says the constant upward trend of the imports shows a powerful resumption of domestic demand. “The question is how much of this demand comes from the investment sector and how much actually comes from households,” Cosse added.

“We have tried hard to find an explanation to this import growth. We noticed a significant increase in the imports of equipment for investments and those of ores and oil products, which are now stored in order to be released this fall, when the prices are sure to go up,” a National Statistics Institute (INS) official said.

“We have nothing to worry about, as long as the trade deficit does not show in the current account deficit. However, the external revenue balance tends to regain its poise,” NBR governor Mugur Isarescu says.

“I have no problem with imported goods purchased with the foreign currency sent by relatives abroad, as neither do I mind those imports made based on privatisation and post-privatisation processes.”

Economic analysts are not worried about the ever-increasing speed of the imports/exports gap, feeling the trade deficit level is still possible to sustain. The point is that the accentuation of this trend suggests things could definitely get worse by the end of the year.

“The increase in deficit could not be so dreadful if we knew what financing sources we may count on. If funding is provided independent of the state’s obligations, the trade deficit should not be a problem,” analyst Aurelian Dochia told Ziarul Financiar.