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Wednesday, October 10, 2007

Romania August 2007 Trade Gap Widens

Romania's trade deficit increased in August when compared with August 2006 as the elimination of a considerable number of trade barriers following European Union entry and a stronger currency encouraged Romanians to buy more goods from abroad.

The deficit widened to 1.77 billion euros in August from 1.3 billion euros in August 2006, according to the National Statistics Institute yesterday (these calculations are based on preliminary data). The actual deficit remained by and large unchanged when compared with the revised deficit of 1.81 billion euros registered in July.

A strong inward flow of funds into Romania (including remittances) since joining the EU last January has strengthened the leu, and this has made imports cheaper. The leu - even despite the recent decline - has still gained 18 percent against the dollar and 4.7 percent against the euro over the past year.

In addition Romania became a net grain importer in the second half of the year after months of record-high temperatures and low rainfall badly affected corn and wheat crops. The drought damaged two-thirds of the 6 million hectares of crops planted this year and destroyed about 1 million hectares.

Imports in August rose an annual 18.6 percent to 3.99 billion euros, while exports increased 7.6 percent to 2.22 billion euros. Imports from other EU countries rose 20 percent as exports to the bloc increased 9.1 percent.

In the first eight months of the year, the trade deficit widened to 13.35 billion euros from 8.38 billion euros in the same period of last year. Imports increased 27.5 percent and exports rose 11.8 percent.

This situation is hardly sustainable, and when put together with all the other information we have coming out of Romania at the present time only serve to complete what is really a very worrying picture.

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