Foreign investments

Romanian FinMin praises robust FDI despite paltry “real” foreign investment

Romanian government officials take credit for what they describe as buoyant FDI these days, but figures show ‘real’ FDI – namely new equity investments – amounted to just 173 million euros in the first seven months of the year (and in fact almost 1 billion euros in the 12 months ending in July) against a GDP of around 260 billion euros in the period 12 months ending in June.

The vast majority of FDI (5.5 billion euros in January-July and almost 9 billion euros in the 12 months to July) is made up of profits made by FDI companies and loans from parent groups .

“Romania remains an important destination for foreign investors. […] the data shows that our wise decisions keep us on track. Foreign direct investment increased by 43.7% in the first seven months of this year, reaching 5.5 billion euros,” said the Minister of Finance. Adrian Caciu commented on September 13 after the central bank (BNR) released balance of payments (BoP) items, reported.

Looking ahead, however, FDI from January to July accounted for just over a third of Romania’s creeping current account (CA) deficit of €14.9 billion over the same period.

More detailed data shows that the FDI and turnover deficit are partly caused by the exceptionally high profits posted by some of the foreign companies operating in Romania (such as OMV Petrom).

“Reinvested profits”, i.e. the profits of FDI companies that have not yet been distributed in the form of dividends, represented 5.4 billion euros of the 9 billion euros of FDI declared by the BNR for the 12 months ending in July. Loans contracted by FDI companies represented an additional 2.5 billion euros.

Genuine FDI was less than €1 billion for the 12 month period.

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(Photo credit: Inquam Photos/Octav Ganea)