The glorious macroeconomic picture painted by the Government early this year is getting gloomier by the day. After a 14-year record-high trade deficit, lower-than-expected economic growth and foreign investment, and surging inflation, a new "surprise" popped up yesterday, completing the bleak scenario.
The currency reserves of the National Bank of Romania dropped 272 million euros in November, down to 6.62 billion euros. Moreover, international reserves (foreign currency plus gold) amounted to 7.75 billion euros at the end of last month, down 260 million euros from October.
The dive is mainly grounded on last month's currency sales the central bank had to make on the forex market - more than 135 million euros. The central bank sold currency in an attempt to contain the ROL's depreciation against the euro, which could have spun out of control, given the single European's currency consolidation on the foreign markets.
Although a stronger euro would boost exports and, implicitly, contribute to a trade deficit cut, the central bank has preferred (at least until now) to keep the ROL/EUR on a tight leash, so as to contain inflation.
However, National Bank Governor Mugur Isarescu was quick to warn against the huge gap between imports and exports, which has become apparent in the past few months. The trade deficit amounted to 900 million dollars in October (a record-high for the past fourteen years), a level that opens the door to a huge external deficit: 6.5% of GDP.
"If the current account deficit exceeds 5% of the Gross Domestic Product, it becomes risky. We do not deem it as a major problem in the short term, but, if it continues, it can turn into a serious risk, which must be contained," said Peter Sanfey, senior economist at the European Bank for Reconstruction and Development (EBRD).
According to Sanfey, Romania is in a crucial economic context, since the progress made in the field of reform has slowed down in the first half of the year.
Eugen Dijmarescu, head of the Foreign Trade Department, feels the same way.
"The trade deficit is growing and will continue to do so. The relation between the current account components has deteriorated, which is most regrettable, given the direct capital outflows logged in portfolio investments, direct investments and tourism. Something must be done because we no longer have direct instruments to control the trade deficit," said Eugen Dijmarescu.
The set of nonmonetary measures will be completed by the Government on December 15-20, although the central bank has already announced its intentions.
"This is a mix of policies, which will include a tight budget, prudent tax policies and the enforcement of the state-owned companies' spending and revenues budgets by yearend. These budgets need to be balanced to avoid the occurrence of arrears and losses," said Finance minister Mihai Tanasescu.
According to the IMF agreement, the Executive should adopt a set of measures able to push the current account deficit down to less than 6% of GDP next year.
oana.nuta@zf.ro ; razvan.voican@zf.ro
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