Covid accelerated the shift from FDI to Foreign Direct re-Investment in Romania

The foreign direct investments (FDI) in Romania, calculator over a 12-month rolling period (EUR 4.72 bln as of Jul-21), is returning to EUR 5 bln typical pre-crisis value - but its structure has shifted from new equity investments to reinvested earnings.

The two types of investments have remained in balance during 2018-2019, but the balance was broken in 2020, when fewer new investors showed up, and incumbent FDI companies had to retain a higher share of their earnings to finance their operations.

Thus, in the 12-month period as of July 2021, net equity amounted to under EUR 1.6 bln, compared to EUR 4.3 bln reinvested earnings, resulting in a ratio of 36.6%.

In 2015, the net equity investments amounted to EUR 3.1 bln, versus only EUR 0.66 bln reinvested earnings.

Roughly speaking, the two types of foreign direct investments were more or less at the same levels of EUR 2.5 bln to EUR 3.5 bln in 2018-2019.

While it remains unclear whether the equity investments will recover quickly after the covid crisis ends, it is visible that the incumbent FDI investors are playing a key role in the country’s balance of payments (BoP).

According to central bank data, the revenues derived by FDI investors in Romania, on a rolling 12-month period basis, have constantly and significantly increased from under EUR 3.8 bln in 2015 to nearly EUR 8.0 bln as of July 2021.

While in the beginning, the FDI investors were reinvesting only a small part of the revenues as new FDI, the pattern has changed, particularly in 2021.

Another insight regards the permanent impact of the FDI investors, mediated by the outflows of incomes generated - some EUR 3.7 bln over the 12-month rolling period ending Jul-21. The figure has been constant or slightly higher (EUR 4 bln per year) over the period since 2015.

(Photo: Wanida Prapan/ Dreamstime)