* Bulgaria, Romania deficits fall
* Balkan pair still among most vulnerable to crisis
* Czech April C/A shows surplus, analyst expected gap
By Jana Mlcochova
PRAGUE, June 17 (Reuters) - Central and eastern Europe's
current account balances improved in April, easing concern
Bulgaria's gap could make it the next victim in the credit
crisis but prompting suggestions Romania's shortfall was
shrinking dangerously fast.
Bulgaria's deficit on the current account, which shows flows
of money in and out of a country related mainly to trade and
dividends, fell to 1.69 billion euros ($2.35 billion) or 5
percent of annual GDP in January-April -- down from 8 percent of
GDP in the same period of last year. []
Analysts expect the gap to drop to 15 percent of GDP overall
this year, from 26 percent in 2008, but say that still leaves
Bulgaria's currency board regime at risk from the sort of
pressure which has afflicted Latvia in the last two weeks.
In neighbouring Romania, analysts were concerned that a 79
percent fall in the deficit to 1.18 billion euros from 5.6
billion in the same period a year ago, shows simply how much the
economy is shrinking. []
"If you turn off the inflows of capital then the current
account by definition has to close and the sign that the...
deficit shrinks is not a sign of an export boom but is a sign of
weakness," said Neil Shearing, an economist at Capital
Economics.
"If you have a collapse in domestic demand, a collapse in
imports, then the current account positions will close and
narrow... This is an important part of what needs to come
through in the region in the next six to twelve months."
The Czech Republic, which has ridden out the deepening of
the financial crisis better than most in the region, showed a
9.89 billion crown ($513.8 million) surplus in April, much
better than the 5.3 billion gap forecast by analysts.
Poland, central Europe's largest economy, reported a 171
million euro surplus in April, higher than the 100 million euros
expected by analysts.
BOOM AND BUST
The EU's former communist eastern wing has benefitted from
capital inflows from the west in past years and booming domestic
demand had already pushed many current accounts deep into
deficit before the financial crisis deepened last year.
The Czechs have traditionally kept the gap small in the past
years, making the crown <EURCZK=> the region's best performer in
the long term.
But the credit crunch and a subsequent economic crisis have
dried up the capital inflow covering the gaps elsewhere.
Since the beginning of the year Romania's leu lost 5.1
percent as investors fled emerging markets and analysts pointed
to its deficit as a focus of weakness.
The current account gap has been a problem in Romania which
sought aid from International Monetary Fund earlier this year.
Many says Bulgaria could be the next in line to ask for IMF aid.
Analysts warn the Romanian gap is narrowing too quickly
helped by the falling consumption and manufacturing.
"The move is in line with what has happened in previous
months ... this is a rapid adjustment that shows strong
contraction in aggregate demand," said Ionut Dumitru of
Raiffeisen Bank in Bucharest.
Czech imports and exports both fell at a double digit pace
in April but imports tumbled deeper than exports, securing a
surplus which analysts said helped to lift the April current
account balance.
"(The Czech data) is positive only because the current
account does not presently pose a risk for destabilisation of
the currency, on the other hand it is a pretty strong indicator
that the economy is weak," said Vojtech Benda, a senior
economist at ING Wholesale Banking.
(Editing by Patrick Graham)
