The increase posted in May by the foreign trade deficit to about 334 million dollars, which equals its value on the first four months, suddenly drew officials' attention to imports, as deficit curbing has been presented so far as a success and an economy stabilisation sign.
Some analysts consider that this leap might trigger the increase of the leu/dollar exchange rate that should have repercussions over inflation, but for the time being, evolutions do not point to any concern among central bank officials, who say that economic indicators are generally on schedule.
"I think that the deficit will be transferred on the exchange rate, because it looks like the rate has been controlled so far. The foreign debt service was relatively relaxed, domestic output is recovering, and imports were handy," explains Lucian Albu, director of the Prognosis Institute within the Romanian Academy.
Trade deficit is reflected in the depreciation of the exchange rate through the high demand of foreign currency for imports, while the tight link between Romanian economy and the outside makes higher prices for imported freight be immediately accompanied by inflation.
May imports increased 25% month-on-month, to 1,126 million dollars, the highest level within the last eighteen months, since domestic currency devaluated against the dollar on the first five months by 13.2 percent, below inflation of 15.7 percent.
Teodor Buftea, director of the monetary policy Department within the National Bank of Romania, thinks that the leap in imports represents a situation of conjuncture, because it is registered following the fall of euro against the dollar, posted in April-May, which boosted euro-denominated imports.
"For May, a certain increase of imports' volume was expected, but not at such a level, " Buftea says.
Buftea explains that there are no reasons for concern, as there is no foreign debt, currency reserves did not go down, therefore deficit is financing itself, "which is not bad." He believes that the depreciation of the leu/dollar exchange rate is normal, while inflation might reach 27%, which is in fact the Government's target.
Deficit's self-financing could be generated by the fact that the 5% reduction of the profit tax applies to exporters that invest in technology the rest of the profit, 25% of the taxation basis.
"Deficit is not dangerous as long as technology imports registered an increase," Industry and Trade Ministry state secretary Sorin Potanc said.
At the end of April, the Government approved the implementation norms for the Ordinance on VAT regime issued in January, which stipulates that the contribution in kind to the share capital of companies is VAT exempt. "Many of my clients have been waiting for these norms in order to introduce cars and equipment into the country," states Nicolae Grigorescu, the manager of an audit company. "The increase of imports for industrial goods is beneficial for the economic growth," Teodor Buftea points out. "Anyway, the massive increase in the trade deficit in only one month is clearly a sign of economic instability, so as one may hardly say that economic recovery is guaranteed in a long term," Lucian Albu said less optimistically.
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