Foreign direct investments in Romania plunge by 56% in Jan-Sep

The net foreign direct investments (FDI) in Romania plunged by 56% in the first nine months of this year compared to the same period of 2019, to EUR 1.9 billion (just under 1% of GDP).

Thus, the FDI covered less than a third of Romania's current account deficit in the same period (EUR 7.74 bln).

The most visible driver behind scarcer FDI in the first three quarters of the year was the coronavirus crisis. However, the slump in the FDI inflows to the country was visible since the first quarter of 2020, when the FDI inflows turned to a negative EUR 400 million (net outflows) compared to EUR 1.2 billion (net inflows) in the first quarter of 2019.

FDI data is subject to frequent revisions and not necessarily precise in terms of timing (the reporting date may differ from the date of the investment decision), but this still shows a clear downward trend this year compared to last year.

Regarding the sources of the EUR 2.5 billion drop in FDI, roughly EUR 1.3 bln is explained by the scarcer equity contributions (not including reinvested earnings) that dropped to EUR 774 mln.

The reversal in the flow of loans to subsidiaries of foreign groups explains another EUR 1.5 bln (local subsidiaries paid back loans to their parent-groups this year instead of borrowing like they did last year).

However, FDI companies retained more earnings in Jan-Sep this year - despite their scarcer earnings in absolute value.

(Photo source: Pixabay.com)