Romania's current account deficit expands more in January, yet at a reduced rate
Romania's Current Account Deficit Expands in January
Romania's current account (CA) deficit expanded by 16% year-on-year to €1.65 billion in January, following a 37% surge in 2024, according to data released by the central bank BNR. The widened deficit is not indicative of the anticipated improvement in Romania's external balance, which was expected for this year.
Romania's economic growth has slowed, with the country's GDP no longer experiencing high rates (due partially to lower inflation and moderate economic growth). Consequently, the CA deficit is expected to either stay constant or contract to result in a smaller deficit-to-GDP ratio.
Over the past 12 months, the CA deficit has increased by 32% year-on-year to €29.6 billion, just shy of the €29.4 billion recorded in 2024. Although an improvement from the 37% year-on-year advance in 2024, it is still insufficient.
The CA deficit accounted for 8.3% of GDP in 2024, a figure that the rating agency Fitch projects will decrease to 7.3% in 2025, assuming 2.1% GDP growth and moderate fiscal consolidation (to 7.5% of GDP public deficit). Moody's, on the other hand, did not provide a specific projection for Romania's CA deficit but indicated expectations for milder fiscal consolidation (to 7.8% of GDP deficit this year). The state forecasting body CNP predicted a 7.4%-of-GDP CA gap for 2025.
The expanded CA deficit is primarily driven by the net import of goods and services, particularly goods. This was particularly evident in January, when the net import of goods and services surged by 75% year-on-year to €1.88 billion compared to a 36% year-on-year advance (to €21.4 billion) in 2024. Meanwhile, exports grew by only 3.8% year-on-year, while imports advanced by 11%.
A unusual positive primary income balance of €199 million was observed, compared to a deficit of €454 million in January 2024. The causes of the improvement are not related to the main flows of incomes, which continue to trend outwards. The balance of secondary incomes was positive in January 2025, but smaller compared to the previous year. However, these factors did not significantly alter the overall CA balance, which primarily widened due to the 75% advance of the net import in goods.
Romania's trade in goods deficit and services account surplus reduction, primary income deficit, and secondary income balance shift were among the factors contributing to the significant increase in Romania's current account deficit in 2025.
The current account deficit expansion in Romania's economy is mainly attributed to the increase in net imports of goods, with a significant surge in January. In the realm of industry and finance, this growing deficit is a concern as it may impede the anticipated improvement in Romania's external balance, relying on expectations for fiscal consolidation and moderate economic growth to bring down the deficit-to-GDP ratio.
