At the same time, the volume of foreign direct investments climbed by 827m euros, to 2.96bn euros. Therefore, June became the best month of this year in terms of the volume of investment inflows (a second best performance was registered in October 2006, with a peak of 868m euros, excluding the money from the privatisation of the BCR.
As a result, the deficit coverage by FDI improved slightly, from 36% in May to 38% in June.
However, the sum of investments in H1, 2007 fell 8.7% below the level registered in the same period of 2006. Out of the 2.96bn euros that entered the country, 52% account for capital contributions and profits reinvested by domestic companies, while the rest consisted of loans granted by multinationals to their domestic units, according to NBR data.
"The current account deficit in June only widened by 1.8bn euros, which is a record high," stated Ionut Dumitru, head of the research department at Raiffeisen Bank. Thus, the share of the deficit in the GDP (calculated for the last 12 months) increased to around 13% from 11.6% at the end of Q1, according to calculations made by Raiffeisen Bank.
Foreign deficit further felt the pressure of a distorted trade balance, which in the first six months of 2007 accumulated a deficit of 7.8bn euros, 77.1% higher than in H1, 2006.
Current account conditions worsened amid a considerable increase in the negative balances registered in other sectors: transportation, tourism, and particularly revenues, as well as amid reduced capital inflows from Romanians working abroad.
Against H1, 2006, the most visible deterioration occurred at the level of revenues, which registered a negative balance of 2.4bn euros, up by 852m euros.
Raiffeisen analysts consider that the increased deficit of revenues is worth noting in the context where dividend and profit repatriation surged.
Current transfers, the main current account chapter that somewhat moderates the deficit, in H1 contributed a positive amount of 2.24bn euros, however, only registering an increase of 220m euros against H1, 2006.
Although 3.3bn euros entered the country, an increase of around 1bn euro on last year, outflows reached over 1bn euros, from just 350m euros in H1, 2006. Therefore, by the middle of the year, the current account deficit accounted for almost 80% of the deficit registered for the entire of 2006. The accelerated increase in negative amounts leads to pessimistic forecasts on the share of the foreign deficit in the GDP for 2007. The negative outlook is supplemented by the slowdown of exports in May and June.
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