12-month FDI in Romania drops to €3.9bn in May

12-month FDI in Romania drops to €3.9bn in May
By bne IntelliNews July 18, 2017

Foreign direct investments (FDI) by non-residents in Romania in the 12 months ending May were €3.93bn (2.26% of GDP, down from 2.45% one year earlier), according to central bank data. 

This was less than the Current Account calculated for the same period, meaning that the FDI no longer finances the widening Current Account deficit.

The trend is likely to strengthen as the Current Account deficit is set to widen further, above 3% of GDP in 2017 and the coming years. Rating agency Fitch has projected the Current Account gap at 3.1% of GDP this year, driven by the 3.7% of GDP budget deficit. The Current Account gap will further widen to 3.3% of GDP in 2018 as the fiscal gap widens as well, to 4% of GDP. FDI is expected to lag behind the Current Account gap.

The trailing 12-month FDI dropped from €4.4bn at the end of March to €3.9bn one month later mainly as an effect of companies in the non-banking sector reducing their indebtedness to local subsidiaries by nearly €500mn in April. A similar reduction, of a wider magnitude (nearly €1bn), was reported in December. It was not uncommon to see negative changes in the stock of inter-company lending (a part of the FDI) in the past, but the €1.7bn decline in December 2016 - April 2017 was of unusual magnitude. In May, the inter-company lending increased and the local non-bank firms received (net) €278mn financing from their foreign parent companies.

The equity investments of non-residents in Romania, calculated as 12-month trailing value, remained roughly constant from January to May at between €4.1bn-4.2bn. This is significantly above the €3.6bn calculated in May 2016 and Mat 2015. The equity FDI increased significantly from €2.2bn in 2013 when data under detailed format was released for the first time.

Data

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