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UPDATE 1-Romania Jan-June trade deficit falls 61.2 pct y/y

Published 08/10/2009, 04:40 AM
Updated 08/10/2009, 04:42 AM

(Adds analyst comment)

BUCHAREST, Aug 10 (Reuters) - Romania's trade deficit shrank by 61.2 percent on the year in the first half of 2009, data showed on Monday, as imports continued to dive faster than exports, pointing to deep second quarter economic contraction.

Shrinking imports remove a key driver of economic growth in recent years in Romania as cash shortages, rising unemployment and collapsing manufacturing hit domestic consumption.

Data from the National Statistics Board (INS) showed the shortfall reaching 4.3 billion euros ($6.10 billion) in the first half. June's trade deficit was 668 million euros, it said.

CIF (cost/insurance/freight) imports fell 36.6 percent year-on-year to 17.9 billion euros, while exports dropped 20.3 percent to 13.6 billion euros.

Analysts said the decreases are comparable to those in previous months and in line with market expectations, signalling a sharp drop in demand.

Romania's vast trade gap last year put it among the most vulnerable states in central and eastern Europe in terms of financing risks, and forced it to secure 20 billion euros in an IMF-led aid package in March.

Falling imports are a sign of a contracting economy but also fuel that contraction through lower technology imports. Monday's figures gave no breakdown on type of imports

"The June fall is a large one. It is a good sign, we will have a small current account deficit this year," said Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank in Bucharest.

"The market is adjusting, and pretty painfully. This small trade deficit figure likely shows that economic contraction in the second quarter was strong."

Preliminary GDP data for the second quarter is due out on Thursday but Finance Minister Gheorghe Pogea has said the economy had likely contracted by more than 8 percent on the year, compared with a 6.2 percent contraction in January-March. (Reporting by Luiza Ilie; editing by Stephen Nisbet)

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