The balance of payments deficit for the first 6 months amounted to 9.8 billion euros, about two billion less than in January-June 2022, according to BNR data released on Monday. The goods balance recorded a smaller deficit of €1.4 billion, while the services balance recorded a larger surplus of €1.7 billion.

Non-resident direct investment in Romania fell below €4 billion in the first 6 months (compared to €4.5 billion in the first half of last year), and intra-group loans registered a negative net value of €353 million.

In the first 6 months, the total foreign debt increased by 14.67 billion euros.

According to the NBR:

• long-term foreign debt amounted to EUR 112.6 billion as of June 30, 2023, having increased by more than 15% compared to the beginning of the year;

• Short-term external debt recorded a level of 46.64 billion euros as of June 30, 2023, decreasing by 0.4% compared to December 31, 2022.

The long-term external debt service level was 14.9% in January-June 2023 compared to 16.2% in 2022.

Coverage of imports of goods and services as of June 30, 2023 was 5.1 months against 4.4 months as of December 31, 2022.

The degree of coverage of short-term external debt, calculated at residual value, by foreign exchange reserves in the NBR as of June 30, 2023 was 90.5% against 80.2% as of December 31, 2022.

Why is the balance of payments important?

The balance of payments includes the country’s operations (export and import of goods and services) for a month or a year.

It helps the government to analyze the potential of a particular industry to increase its exports and formulate policies that will lead to this growth.

It also gives the government tools to discourage certain imports if they weigh too much on the balance sheet.

The balance of payments shows the government the state of the economy and thus helps it to look for mechanisms of economic growth. In the adopted decisions, the monetary and fiscal policy should take into account the evolution of the country’s balance of payments.

Helps determine sources of income and expenses in foreign currency. This information is useful for determining the level of foreign exchange reserves that a country must maintain to ensure the fulfillment of its international obligations.

The balance of payments also provides information on the competitiveness of a country’s exports and imports. If a country has a high trade deficit, it may mean that its exports are not competitive enough and it may need to take measures to improve its competitiveness.

You can also track the impact of government policies on the economy through the balance of payments. For example, if a government wants to encourage exports, the balance of payments can be used to monitor the effectiveness of this policy.

This can help identify potential risks to the country’s economy. For example, if a country is heavily dependent on the export of a certain product, a drop in demand for that product can have a significant impact on the country’s economy.