Romania’s trade gap widened by over 20% in January-May compared to the same period in 2019.
The return to normal for Romania means the return to wide trade deficits and the so-called “revenge spending” in the post-crisis period only smooths the return to that unsustainable path.
Romania’s imports recovered faster than exports, May foreign trade data show, and this is consistent with the buoyant private consumption previously reported. Retail sales grew by 7.3% y/y in April (latest data available) driven by a 12% annual advance of non-food retail sales.
In May, Romania’s exports were still 5% below those in May 2019 despite the misleading 59% y/y advance, and this is still a good performance given the state of the global supply chains.
But imports (+54% y/y) already recovered fully to the levels seen two years ago (-0.3% versus May 2019), before the crisis. This can hardly be seen as a surprise since the non-food retail sales in April (latest data available) were no less than one quarter above the non-food retail sales in April 2019.
Revenge spending is visibly pushing up imports (hence the trade gap) at the expense of both domestic balances (demand-driven inflation) and external balances (the foreign trade gap).
In May, Romania’s exports rose by 59% y/y to €7.73bn. The trade deficit widened by 41% y/y to €1.77bn. More importantly, the trade gap was nearly 20% wider than it was in May 2019.