Bulgarian, Romanian & Czech current-account gaps widened

Bulgaria’s current-account deficit widened to 12% of GDP at the end of August from 7.5% a year ago as imports surged. The monthly deficit widened to €160.7 million ($227 million) in August from €87 million a year ago as imports were double that of exports, the Sofia-based central bank said on its Web site today. The seven-month current-account gap reached €3.3 billion compared with €1.6 billion a year ago.

Romania’s current-account deficit widened in the first eight months of 2007 from the same period last year as the country’s entry to the EU and a stronger currency increased imports. The deficit widened to €10.23 billion ($14.6 billion) from €5.47 billion a year earlier, the central bank said in an e-mailed statement today. In August, the deficit widened by €1.26 billion and by €1.16 billion in July. „The deficit this year will be humongous,” said Florin Citu, deputy head of financial markets at ING Bank in Bucharest. „The question is whether this will be worked out gradually or by a sudden drop in the leu and a drop in economic growth. If I were a betting man, I would go for the latter.” The International Monetary Fund warned the government last month to rein in the current account deficit because it’s making the leu „more and more vulnerable” to developments abroad, including growing investor reluctance to invest in riskier assets. Romania eliminated tariffs on imports from EU countries when it joined the bloc on Jan. 1. Imports have also become cheaper as investment from Europe strengthened the leu. Lower taxes, higher wages and an increase in loans also gave Romanians more cash to buy imports. The leu has gained almost 5% against the euro and 16% against the dollar in the past year. Romania’s trade deficit, the major component of the current- account gap, widened in the first eight months of the year to €10.86 billion, from €6.43 billion in the same period of last year, the central bank said. Money transfers to Romania, mostly by citizens sending money home from abroad, rose to €3.49 billion in the period from €2.77 billion a year earlier. The central bank also said foreign direct investment in the first eight months of the year fell to €4.06 billion from €4.3 billion in the same period last year. Long-term foreign debt rose 19% at the end of August from December 31 to €33.9 billion, the central bank said.

The Czech Republic’s current account deficit widened in August to the biggest monthly gap in three years, the Czech National Bank said. The shortfall amounted to 32.7 billion koruna ($1.7 billion), compared with a gap of 8.8 billion koruna in July and a 12.9 billion-koruna deficit in June, the central bank said on its Web site today. The figure is bigger than the median estimate of 12 economists for a 9 billion-koruna deficit. (Bg)