BUCHAREST, Feb 9 (Reuters) - Romania's 2008 foreign trade deficit grew by a modest 3.4 percent on the year, compared to a 46.2 percent expansion in the previous year, as a sharp slowdown in import growth curbs the external gap.
The slowdown was caused by the leu currency depreciation and slowing domestic demand, both hammered by the global cash squeeze, analysts said.
The trade gap, at 22.52 billion euros ($29.07 billion) for the whole year, is a major headache for Romania, making it one of the most vulnerable economies in central and eastern Europe in terms of financing risks, heightened by the global downturn.
But the shortfall has been adjusting for months as recession deepened around the world and analysts said the import-export gap will continue to narrow.
'The depreciation of the currency and the crash in domestic demand are the reasons why the trade balance is adjusting so strongly,' said Nicolaie Alexandru-Chidesciuc, senior economist with ING Bank in Bucharest.
'The signal is a positive one, the adjustment is continuing.'
Data from the National Statistics Board (INS) showed CIF (cost/insurance/freight) imports rose 9.4 percent year-on-year to 56.13 billion euros, while exports were up 13.8 percent to 33.61 billion euros.
'The leu depreciation and dwindling demand will likely continue and as a result we will see further adjustment of the trade gap and of the current account deficit,' Chidesciuc said.
On Friday, the central bank said the current account deficit, whose correction it is closely monitoring, may fall to below 10 percent of GDP this year, from around 12 percent last year.
The Romanian leu weakened slightly against the euro after the data release, trading at 4.2540/35, from Friday's close of 4.238. The unit has fallen nearly 6 percent to the euro since the start of the year.