Are you sure?

Romanian 2006 trade deficit widens as leu gains boost imports

Romania's trade deficit widened last year as the leu strengthened against almost all other world currencies, making imports cheaper, and higher wages encouraged Romanians to shop more.

The deficit, including the cost of freight and insurance for imports, widened to €14.9 billion ($19.4 billion) from a deficit of €10.3 billion in 2005, the National Statistics Institute said in an e-mail today. The December deficit widened to €2.1 billion from €1.63 billion in November. „The trade deficit will continue to expand this year but as long as capital goods are being imported it shouldn't be a problem,” Radu Craciun, head of research at ABN Amro Romania, said in a telephone interview today. Capital goods imports „will eventually reflect in increased competitiveness.” An inflow of foreign investment last year as Romania prepared to join the European Union on January 1 prompted the leu to advance 21% against the dollar and 8.9% against the euro. It outperformed all currencies except the Slovak koruna, making imports cheaper. Imports last year rose 25% from 2005 to €40.7 billion as exports increased 16% to €25.8 billion, the institute said. In December, imports rose 31% from a year earlier to €4.06 billion as exports increased 21% to €1.9 billion. Net wages rose an average of 30% in December from a year earlier, the institute also said in the note today, helping boost sales of retail goods, particularly imports. Romania's widening trade deficit is the main reason for the country's widening current-account gap. The IMF and the EU called on the government to curb the deficits and keep consumer prices under control. The country's current-account deficit in the first 11 months of last year widened to almost €8.9 billion from €6.1 billion in the same period a year earlier. The deficit was almost covered by foreign direct investment, which increased 84% in the period to €8.3 billion. Romania's trade deficit last year, when the cost of freight and insurance is included, widened to €11.8 billion from about €7.8 billion in 2005, the institute said. (Bloomberg)