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Monday, February 11, 2008

Romania Trade Deficit December 2007

At last some (slightly) good news. Romania's trade deficit was smaller in December 2007 than in December 2006, recording the first such drop since October 2004 as the weaker currency and rising industrial capacity boosted exports and discouraged imports to some extent.

The deficit in December was 2.07 billion euros ($3.2 billion), compared with 2.1 billion euros in December last year, the National Statistics Institute said in preliminary data released today. This compares with a revised 2.2 billion euro deficit recorded in November.

Romania's leu has depreciated almost 14 percent against the euro since August as international investors have grown increasingly wary of areas seen as high risk amid mounting concern over the U.S. and global economy. The leu had been among the world's top- performing currencies in the previous two years, making imports cheaper for Romanians.

Imports in December rose an annual 6.5 percent to 4.3 billion euros, while exports increased 15 percent to 2.3 billion euros. Imports from other EU countries rose 7.63 percent as exports to the region increased 17.6 percent. So what is most pronounced about the reduction in the December deficit is not so much the continuing rise in exports, but the sudden drop in imports. It is too soon to say what lies behind this - is, for example domestic demand faltering for some reason - as it seems to be to sudden to be a simple question of the currency movement alone. However we will have to wait for more data before we can really see anything clearly here.

In the full year, the deficit widened to 21.5 billion euros from 14.9 billion euros in 2006 as imports rose 24.9 percent and exports increased 13.7 percent

The trade deficit is the main component of Romania's current- account gap, which widened in the first 11 months of last year to a record 15.29 billion euros. Fitch Ratings and Standard & Poor's have lowered their outlooks on Romania's credit rating in recent months, citing the growing current-account gap.

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