* Bulgaria and Romania Jan current account gaps fall by half
* Latvia posts first c/a surplus since mid-1990s in January
* Czech Jan current account gap worse than forecast
* Slovak Jan foreign trade gap wider than expected
(Adds Latvian and Polish Jan current account data)
By Tsvetelia Ilieva and Patrick Lannin
RIGA/SOFIA. March 13 (Reuters) - Collapsing domestic demand
slashed current account deficits in Bulgaria and Romania, while
Latvia posted its first surplus since mid-1990s, raising worries
that the abrupt cut in the shortfall spells deep recession.
The bloated gaps have made the Baltic and Balkan countries
extremely vulnerable to a crisis spreading across eastern Europe
and outflows of investment have already forced Latvia and
Romania to seek help from the IMF and the European Union.
Many of the region's former communist countries accumulated
large current account deficits in the past years as consumers
with an easy access to credit, rushed to buy flat TVs and homes.
But the credit crunch put a hold on that and Latvia and
others have already drifted in recession.
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. [] [].
Poland's current account deficit also shrank [].
Latvia, which sees its economy contracting 12 percent this
year, ran a small surplus in January, the first in about 15
years, as imports plunged [].
The Latvian central bank said on Friday it expected the
current account deficit to shrink to 6 percent of GDP this year
from 13 percent in 2008.
The unfolding crisis has already sparked violent unrests in
Latvia in January and toppled the government. A new centre-right
cabinet that took office on Thursday is now faced with the
urgent task to chart a way out of a deepening recession.
Data on Friday showed Bulgaria's current account gap nearly
halved to 439.7 million euros ($565.9 million) in January 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 [].
DEEP RECESSION
Wide current account deficits have been at the heart of a
banking and debt crisis for many of central and eastern Europe's
new European Union members since the crisis unfolded.
But analysts said such steep drops showed both Romania and
Bulgaria -- among the EU's fastest growing in recent years --
were seeing a collapse in domestic consumption to accompany an
implosion in euro zone demand that has hammered exports.
"The reduction of the C/A shortfall is welcome, however a
sharp variation, such as this one, would trigger a fall in GDP
data, therefore a smoother correction would be preferred," said
Melania Hancila of Volksbank in Bucharest.
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.
Some analysts say Bulgaria may be next in line to seek aid
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.
"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."
(Editing by Patrick Graham)
