As the current account deficit has doubled over the first six months of the year, this brings up a an issue that needs an answer in the near future: how is the Romanian economy to become free of the pressure put by such a wide gap between exports and imports?
Economists are already contradicting each other in the media, as regards the danger of this trend, while renowned journals in Germany are running comparisons with the 1997 crisis in South Eastern Asia.
“The increase in the trade balance budgetary deficits could lead to a financial crisis like the one in SE Asia in 1997,” reads an article recently published in Financial Times Deutschland, which deemed Romania and Bulgaria as the problems.
Given that the crisis in Asia started by massive devaluation of the Thai bath, which revealed the pressures put on the exchange rate caused by the capital outflows in the region, the question is: could this happen to the ROL soon, as well?
“There is a problem, indeed, but not imminent. Romania will not experience a foreign debt crisis over the next twelve to eighteen months, there’s no way it could happen. As neither will it experience an exchange rate crisis, in addition to a foreign debt crisis. We have the necessary resources to finance the current account deficit,” Valentin Lazea, NBR’s head economist, claims. He says the Romanian economy is far from the stage the economies in SE Asia had reached at the time the crisis occurred.
However, Lazea admits that the financing sources of the current account deficit are a matter of chance: transfers, revenues from abroad, errors and omissions, due to the lack of significant direct foreign investments.
This is where the problem might come from. “Romania does not have large debts, we have no speculative cash inflows. The point is that the inflows of “indefinite” capital, that is errors and omissions can be considered speculative capital,” says economic analyst Daniel Daianu, former Finance minister.
“There are two options to adjust the payment balance: by commercial policy and by exchange rate policy. If commercial or fiscal (reducing budgetary deficit) measures fail to adjust the deficit, the ROL may be raided,” he says.
A look back in time shows that the years when the highest current account deficit was registered, namely 1996 and 1998, were followed by a powerful ROL depreciation, nearly 100% in 1997 and 66% in 1999. What will happen in 2002?
“NBR has a depreciation programme which it did not give up and which will continue to be enforced, so that the depreciation should be lower than the inflation this year. The modification of this exchange rate policy was not brought up in the talks with the IMF,” says Valentin Lazea.
As for a possible similarity between Romania’s current situation and that of SE Asia in 1997, he adamantly claims there is no such thing.