Is it time to worry about Romania’s current account?

The widening of Romania’s current account deficit to a 10-year high partly reflects a rise in foreign firms’ reinvested earnings which is not a concern. But the trade balance has also worsened and the share of the deficit financed by stable forms of capital inflows has fallen. This makes the leu vulnerable to a deterioration in investor sentiment, and presents an upside risk to our interest rate forecast.