Fitch: Bulgaria, Croatia, Romania account deficits driven by demand

Fitch Ratings said that rising current account deficits in Bulgaria (BBB), Croatia (BBB-) and Romania (BBB) reflect booming domestic demand, not a crisis of competitiveness.

"Despite disconcertingly high current account deficits, Bulgaria, Croatia and Romania are seeing strong export growth and rising export market shares, suggesting their real economies remain competitive," Andrew Colquhoun, director in Fitch's sovereigns group, said in an agency rating.

The three countries are running big current account deficits: 8.1% of GDP for Croatia, 10.3% for Romania and 16.3% for Bulgaria in 2006. Fitch noted, however, that export growth has been strong - averaging 12% a year from 2000 to 2006 in Croatia and 21% a year in Bulgaria and Romania - and said that trade deficits have grown because imports have risen even more quickly to meet soaring domestic demand.

"Ultimately, external imbalances on this scale are unsustainable and will need to be corrected at some stage. While the risk remains of a disorderly correction in response to some future shock, developments are consistent with a gradual adjustment as the three countries converge with [Western] European living standards," Colquhoun added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.