Current account gap bottomed in July to EUR 165.4 mn (-41.2% mom) solely owed to the falling foreign trade deficit (-26.6% mom), as remittances kept stable pattern (+1.3% mom). Excellent exports performance in June (+11.1% mom) was largely thanks to the corn and fruits and vegetables exports, while partly flavoured by unusual dinar depreciation in June (-5.4% mom). On the other side, imports fell by 1.9% mom largely led by fall in oil imports. Financial account was halved in June (-64.8% mom) due to fall in portfolio investments (-31.6% mom) and massive repayment of ST and LT borrowings from abroad by banks (-776.8% mom) as well as LT borrowings corporate repayments (-16.8% mom). The only positive drift on the financial account came from surprisingly nice development in FDI’s (+21.4% mom). Consequently balance of payment gap increased to EUR 59.2 mn after EUR 21 mn deficit in the month before. Looking in annual terms, C/A plunged by 42.6% yoy facilitated by sharp decline in foreign trade deficit (-23.5% yoy), which is encouraging sign. Though on the other side, financial account was cut by 59.5% yoy which might be owed not only to higher borrowings repayments by bank’s and corporates, but as well as reduced cross-boarder lending. At the end balance of payment deficit was significantly reduced in June 2011 (EUR 59.2 mn) compared to June 2010 (EUR 297.7 mn).
Looking at Jan-June/11 C/A gap remained at almost same level compared to Jan-June/10 standing at EUR 1.4 bn facilitated by stable foreign trade gap (+5.7% yoy), while nice current transfers sentiment (+8.8% yoy. Overall BoP was in surplus in the six months of 2011 (EUR 200.2 mn) compared to last years deficit (Jan-June/10: EUR 688.1 mn) due to portfolio investments (EUR 765.9 mn), which primarily relate to investments in Min Fin T-bills (EUR 751.5 mn), but also improved net FDI’s (EUR 566.1mn). We view that FDI will continue the upside trend taking into account a number of recent FDI announcements (i.e. Italy Margaritelli will set up a factory for manufacturing concrete railroad sleepers, Benetton is looking to open another plan along with acquired Nitex’s plant, Italian engineering company and local partner will set up a joint venture with power utility Elektroprivreda Srbije and Ibarske Hidroelektrane, aiming to design a spatial plan development related to the construction of 10 hydroelectric power plants, app investment EUR 300 mn and others). However, the third segment of the financial account (other investments) fell tremendously in Jan-June/11 (- 45.8% yoy) due to still hesitant approach of the local banking industry to disburse foreign funds to finance local economy, but rather utilizing available local funding.
Source balkans.com
