Wednesday, July 15, 2009

Romania c/a deficit shrinks in Jan-May

BUCHAREST, July 14 (Reuters) - Romania's current account deficit shrank 75.5 percent year-on-year to about 1.8 billion euros ($2.52 billion) in the first five months of the year, the central bank said on Tuesday.

The external shortfall has been a headache for Romania and one of the main causes of the leu currency's weakness earlier this year, making the country more vulnerable to the global cash squeeze and prompting it to seek IMF help.But the gap is narrowing sharply as the world economic crisis hits consumption and manufacturing, raising concerns that it may be adjusting too fast."This is a strong adjustment, signalling a strong contraction in aggregate demand," said Ionut Dumitru of Raiffeisen Bank in Bucharest.

The Romanian economy shrank 6.2 percent on the year in the first quarter of 2009.Romania has turned from an investment hot spot and a fast-rising economy into one of the EU's most vulnerable states, as its large external deficit and dependence on scarce foreign cash have exposed it to a potential financing crisis.

In March, the European Union state secured a 20 billion euro loan package, led by the International Monetary Fund, to help underpin markets and pump fresh cash into the ailing economy.The leu firmed marginally after the data release to trade at 4.2160 per euro at 0940 GMT against Monday's 4.2187 close.

The bank said the external gap was entirely covered by foreign direct investment, which was 2.48 billion euros at the end of May compared with 4.27 billion euros in the same period of last year.

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