Non-residents’ direct investments in Romania increased by 18.5% y/y to €2.34bn (1.4% of the full year’s projected GDP) in January-July, the central bank announced on September 13.
Annual FDI has hovered around €3bn (1.9% of GDP) for the past three years, but it remains volatile. The significant rise in January-July came after a 25% y/y expansion in 2015 and is consistent with rising investor confidence, the government’s support for large investors (typically foreign) and low global interest rates.
FDI was higher than the €2.34bn current account deficit in the first seven months of the year. FDI has constantly safely covered the C/A deficit in previous years, but the coverage ratio dropped below 100% temporarily in the first months of this year. The coverage turns uncertain as the C/A deficit is widening.
Out of total FDI in January-July, equity, including re-invested earnings of FDI companies controlled by non-residents and operating in Romania increased by 25% y/y to €2.06bn. The loans extended to local subsidiaries by foreign parent groups decreased by 13.5% y/y to €279mn.
In the 12 months ending July, non-residents’ direct investments increased by 29.4% y/y to €3.4bn (2.1% of GDP). The equity contribution was €3.7bn (2.3% of GDP) and non-residents reduced their debt exposure to their local subsidiaries by €334mn.