* Bulgaria and Romania Jan current account gaps fall by half
* Czech Jan current account gap worse than forecast
* Slovak foreign trade gap wider than expected
By Tsvetelia Ilieva
SOFIA, March 13 (Reuters) - Bulgaria's and Romania's current
account deficits fell by about half in January, showing an
abrupt reduction in the Balkan duo's main economic weak point
but also raising worries a deep recession is on the way.
The bloated deficits have made the Black Sea neighbours
extremely vulnerable to a crisis spreading across eastern Europe
and outflows of investment have already forced Bucharest to seek
help from the International Monetary Fund and European Union.
The Czech Republic's current account gap and Slovakia's
trade shortfall also narrowed in January, but they were above
market expectations as weak euro zone demand hit exports in the
manufacturing-heavy countries. [] [].
Data on Friday showed Bulgaria's current account gap nearly
halved to 439.7 million euros ($565.9 million) in January from,
806.8 million euros a year ago as global downturn hit imports
[].
In Romania, the gap shrank 54.6 percent year-on-year to 525
million euros ($675.7 million), signalling a darker economic
outlook for the Balkan country [].
Analysts say the abrupt drops showed how hard the global
downturn has hit the emerging economies.
"The narrowing gaps are a direct reflection of really weak
demand conditions in the region," said Neil Shearing, an analyst
with London-based Capital Economics.
"In Bulgaria and Romania, the current deficit can get to
single digits as a percent of GDP easily... this signals deep
recession."
Analysts say such steep drops indicated both states -- among
the EU's fastest growing in recent years -- were seeing a
collapse in domestic consumption to accompany an implosion in
demand from the euro zone that has hammered exports.
"The reduction of the C/A shortfall is welcome, however a
sharp variation, as this one, would trigger a fall in GDP data,
therefore a smoother correction would be preferred," said
Melania Hancila of Volksbank in Bucharest.
CURRENCY WORRIES
Wide current account deficits have been at the heart of a
banking and debt crisis for some of central and eastern Europe's
new European Union members since the crisis unfolded.
Romania's external shortfall, which rose to 12 percent of
GDP last year, is one of the main causes for weakening in the
leu currency <EURRON=>, which despite staying roughly flat
against the euro in recent weeks, has lost 17 percent since last
year.
Earlier this week Romania became the third EU member state
after Hungary and Latvia to ask Brussels for an IMF-led aid
package due to lack of foreign financing that has hit growth,
raised the risk of default across the bloc's eastern wing.
Some analysts say Bulgaria may be next in line because of
its external shortfall, which shot up to 24.3 percent of GDP
last year, and the evaporation of billions of dollars in foreign
direct investment that until now had covered the gap.
Sofia, which operates under a currency board regime and has
pegged its lev to the euro, has said its banking and financial
systems were stable for now and it does not need help.
(Reporting by Tsvetelia Ilieva; editing by Patrick Graham)
