Romania’s current account (CA) deficit surged by 43% y/y to EUR 33.6 billion in 12 months to May 2025, driven by each of its main components but particularly by the 17% y/y wider trade deficit in goods, according to data published by the National Bank of Romania (BNR).
Romania’s CA gap thus hit 9.5% of GDP in the 12-month period, based on the latest available 4-quarter GDP (as of March 2025), up from 9.3% calculated one month earlier and 7.3% one year earlier.
In 2024, the CA gap ballooned to 8.4% of GDP, up from 6.6% in 2023, driven by the fiscal deficit (public demand) that reached 8.65% of GDP (cash terms), stimulating the private demand as well through the higher public wages and pensions. This year, moderate fiscal consolidation, particularly expected for H2, is supposed to temper the external balance deficit as well.
Although it widened by only 17% y/y, Romania’s trade deficit in goods in 12 months to May 2025 reached EUR 35.1 billion, EUR 5.0 billion more than in the previous 12 months. This accounted for half of the EUR 10.0 billion y/y advance of the CA deficit.
However, the surplus posted by Romania’s trade in services narrowed by EUR 451 million, a moderate 4% y/y decline to EUR 11.8 billion that, however, contributed to the deterioration of the country’s external balance.
The net acquisition of tourism services increased by 18% y/y to EUR 4.8 billion, witnessing strong domestic demand. The gross acquisition of tourism services rose by 12% y/y to EUR 10.1 billion (some 2.9% of GDP).
The primary income deficit, which reflects mainly the interest and dividends derived by foreign investors (net terms), increased by 21% y/y to EUR 10.3 billion (2.9% of GDP). Out of this, EUR 4.0 billion (+27% y/y) was the net interest paid on portfolio investments, and EUR 12.0 billion was the net dividends derived by foreign investors (+27% y/y).
The net FDI inflows to Romania contracted by 20% y/y to EUR 5.1 billion in 12 months to May 2025, and the gross inflows dropped by 22% y/y to a similar value of EUR 5.1 billion. The FDI thus accounted for only 1.4% of the GDP, down from 2.0% as of May 2024. It accounted for only a small fraction of the CA deficit, with most of the gap being financed out of debt-generating transfers.
Out of the total FDI, some 80% was formed by reinvested profits (+3.7% y/y). The share of reinvested profits was 33% in 12 months to May 2025, close to the ratio seen one year earlier.
iulian@romania-insider.com
(Photo source: Vlad Ispas/Dreamstime.com)
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