Romania’s external trade gap almost doubles y/y in Jun, as exports notably weaken

Romania’s merchandise trade gap widened by 97.0% y/y to almost EUR1.4bn (FOB/CIF) in June, according to preliminary data released by the state statistical institute. The merchandise trade flows continued rising in monthly and annual terms in the period, but only the imports’ growth remained strong, to cover the still robust domestic demand. As for external sales, the rise was moderate, marking a significant slowdown compared to the strong performance reported in May. In fact, the exports’ increase was generally weak in H1 this year, boosted only by two occasional jumps in March and May as a result of some better external market developments. Looking at the market segments, we note that exports towards non-EU countries dropped y/y in June, while imports accelerated growth. Hence, the eternal trade gap with the non-EU markets widened significantly in June and in H1. Romania mostly exports cereals, pharmaceuticals and cars to non-EU markets, so the weakening sales most probably affected those industrial segments. The most important import partners are China, Turkey and Russia, from where the country purchases mostly construction materials, electronics, spare parts, food, chemicals and plastics.

Broadly, the external trade gap increased by more than 30% y/y in H1, fuelled by a strong imports’ rise. The local consumption remained strong in H1 this year, despite entering a slowdown pace. The annualized external trade gap reached 6.7% of the last year GDP in the 12-month period ending in June, up from 6.3% a month earlier. Exports were on a moderated upward trend and jumped more significantly in March and May when some positive developments in the EU triggered some more significant external sale growths for Romania. Imports would very probably remain on the rise in the next periods, but we see some more significant growth moderation, generated by the expected weakening consumption. The domestic inflationary expectations, especially in the energy (fuels and electricity), would most probably boost the prudent mood among consumers, hampering local demand. Exports’ developments remain highly dependent on external markets development, as domestic factors to boost external sales, such as diversification or prices, are not strong enough.

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