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Annual Report of BNR: ‘ the balance of payments and Romania’s international investment position’

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2019 followed the accelerating trend of current account deficit, which started in 2015, due to the deterioration of the balance of goods, and as a whole, the current account and the capital account got together a deficit of 7.6 billion euro, according to the Annual Report of the National Bank of Romania ‘The balance of payments and Romania’s international investment position’. 

‘Despite the increase of the capital account excess, the increase of the current account deficit against 2018 determined the consolidation of the cumulative balance of the current account and capital account in the negative territory. In 2019, the growth rhythm of current accatount deficit (17%) got alleviated against the previous year (when it was over 70 t%) while the excess of the capital account registered a growth rhythm (13.3%) close to the level of 2018. As a whole, the current account and the capital account gathered a deficit of 7.6 billion euro. Approximately three quarters of the deficit of current account (7.8 billion euro. Approximately three quarters of the current account deficit (7.8 billion euro) and the excess of the capital account (2.1 billion euro) came from the trading with states in the European Union (EU).Out of the deficit of current account registered with the EU countries, the one registered in the euro zone (ZE10) represented almost 48% (3.7 billion euro)’ the Report says.

During 2019, the financial account registered net entries of 5.1 billion euro, determined by net accumulations of liabilities such as direct investments and portfolio investments. From the geographic perspective, the financial account was influenced as well as the current and the capital account by the relation with the EU.

According to the document, in 2019, the balance of payments of Romania had a negative balance of the current account of 10.480 billion euro, as compared to 8.960 billion euro in 2018.

The share of the current account deficit in the GDP was 4.7% as compared to 4.4% in the previous year, the growth by 0.3 percentage points coming from the increase of the deficit registered by the balance of goods (up by 0.6 percentage points from GDP).

BNR mentions that the evolution of the current account and its parts show the accentuation of the deficit of the balance of goods by 17.7% in 2019 against the previous year, due to the quicker growth of imports against exports. The balance of services registered an excess increased by 3.5% against 2018, stimulated by the increase of payments in IT services, road goods transport, professional and managerial consultancy services. The primary income reduced its deficit being influenced favourably by the payment of the employees and the subsidies coming from the EU and the secondary income had a consolidation of the excess, determined by the increase of remittance by the Romanian workers from abroad.

As regards the deficit of financing of the companies in the real sector, measured through the net necessary of financing was 0.8% of GDP 2019.

‘As a structure, the real sector faced divergent dynamics. The upgoing trend of investments, present in the last years, contributed to the revigoration of the sector of constructions( both for the residential sector and that of logistic industrial) and the stimulation of the producers of equipment and long lasting goods with effects in the performance of the companies specialised in goods transport’ the Report says.

Agriculture and non-financial services (mostly the component of IT services) contributed in their turn to the support of the positive trend and economic growth. In exchange, the industrial sector got into the negative register of growth, as a result of the diminution of the foreign orders, due to the slowing down of the rhythm of economic growth in the euro zone, and especially in the decline of certain of industrial sectors (the German auto industry).

According to BNR, the non-financial sector had increased liquidity in 2019, due to the relaxation of the lending conditions and the increase of the domestic demand. The term deposits placed with banks both in Romania and abroad had a robust evolution (+15%), investments of the non-financial companies in Romanian governmental bonds increased significantly (+57%) and commercial intercompany loans and the sums to receive were reduced by 25% against the previous year.

The report mentions that total exposure of the banks towards the non-financial companies reached the level of 119 billion lei, increased by 6% against the previous year, on the basis of loans with maturity longer than one year. Similarly, the non-financial companies continued their commitment to loans from Romanian non-financial companies, their upgoing trend had an installment of 11%.

The foreign debts of the Romanian companies on the basis of financial loans reached 181 billion lei, showing the potential for improvement of the level of financial brokerage and the competitive position of foreign investors on the market of banking brokerage services. Commercial debts and the intercompany sums for payment are still the main autonomous resource for financing of the real sector, their share in the total of financial debts of the sector being 40%, plus the ad-hoc financing offered to final shareholders.

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