Romania’s trade deficit widened by 21.8% y/y to €7.7bn in the first six months of this year compared to the same period last year, the statistics office INS said. 

However, it narrowed by 13.2% y/y in Q2 after the 16.5% y/y widening in Q1, as imports advanced at a slower pace in the second quarter of the year — with a positive effect on the external balance that was mentioned by central bank governor Mugur Isarescu as well when presenting the latest Inflation Report.

Exports went up by 2.7% to €34.9bn in the first half of the year, while imports increased by 5.7% y/y to €42.6bn. But developments were slightly different in Q2: imports in particular moderated to a 3.8% annual increase in the second quarter of the year, less than half of the 7.7% y/y advance in Q1. Export growth also eased to 2.2% y/y in Q2, down from a slightly better 3.2% y/y performance in Q1.

Exports thus increased by a rather modest rate compared to the consensus expectations for 4% real GDP growth this year, consistent with higher expansion of nominal GDP (roughly 10%). But the dynamics of exports depend to a large extent on external factors and the expectations are rather bearish.

Separately, Romania’s imports increased at an annual rate that was twice as fast as that of exports, 5.7%, in H1.

Strong private consumption was driven by rising household incomes, as average net wages increased by 13.6% y/y in H1 this year and employment advanced, although at a slower rate compared to last year (1-2% y/y). In this respect, the growth in incomes does not explain the decline in the growth of imports: net wages accelerated to 11.2% y/y in Q2 from 10.2% y/y in Q1. Consumer confidence also remained robust. The slower growth in consumer loans after new regulations were enforced at the beginning of the year might explain the potential moderation in private consumption indicated by imports growing at only a modest pace in Q2.