UPDATE: FDI falls by almost 40 percent, current account gap widens by 32 percent in the first nine months, announces BNR

Update: Between January and September 2010 the balance-of-payments current account posted a deficit of EUR 4.2 billion, 32.6 percent higher than in the same period of 2009, announced on Friday the National bank of Romania (BNR). The drop was mainly generated by the the 30.1 percent decrease year on year in current transfers balance, reads the BNR report.

Non-residents’ direct investment in Romania (FDI) amounted to EUR 2,07 billion (as compared with EUR 3,4 billion over January-September 2009) and covered 48.9 percent of the current account deficit in the first nine months of 2010. Over January-September 2010, out of the total figure, equity stakes amounted to EUR 1,3 billion and intra-group loans to EUR 732 million.

Medium- and long-term external debt at end-September 2010 stood at EUR 71,6 billion (80.2 percent of total external debt), 8.9 percent above the level recorded at end-2009.

Short-term external debt at end-September 2010 totalled EUR 17,6 billion (19.8 percent of total external debt), up 14.6 percent from end-2009.

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Foreign direct investments (FDI*) to Romania in 2009 collapsed by 63 percent compared to the previous year, according to data published by the National Bank of Romania (BNR) this week.

The FDI net flow to Romania in 2009 amounted to EUR 3.48 billion of which 49.6 percent were equity stakes and 50.4 percent was net credit from foreign investors, according to the same source. Out of the total FDI equity flow, 98.3 percent (EUR 3.06 billion) went into corporate development, 1.1 percent (EUR 34 million) were targeted towards mergers and acquisitions and only 0.6 percent (EUR 19 million) to greenfield investment.

At the end f December 2009, FDI stock reached EUR 49.98 billion, of which 71.2 percent were equity stakes, including reinvested earnings and the remaining 28.8 percent was net credit received from foreign investors.

By economic activity the bulk of FDI were targeted towards manufacturing (31.1 percent of total), out of which the largest recipients were: oil processing, chemicals, rubber and plastic products (6.3 percent), metallurgy (5.2 percent), transport means (4.7 percent), food, beverages and tobacco (4.1 percent) and cement, glassware, ceramics (3.3 percent). “Despite their large potential, certain sectors, such as textiles, wearing apparel and leather goods (1.4 percent of total FDI), still hold a rather small share of FDI”, reads the BNR report.

Other industries that have attracted significant FDI are financial intermediation and insurance which account for 19 percent of total FDI stock, construction and real estate transactions (12.9 percent), trade (12.3 percent), and information technology and communications (6.5 percent).

Data about the regional dispersion of FDI reveals considerable discrepancies among geographical regions with the Bucharest-Ilfov region attracting 63.4 percent. Other development regions benefited from FDI inflows as follows: Center region (7.4 percent), South region (7.2 percent), West region (6.2 percent) and South -East region (5.9 percent).

As for top investors to Romania, the top 5 countries by share of FDI stock as at 31 December 2009 were the Netherlands (21.8 percent, up from 17.2 percent in 2008), Austria (18.1 percent of total stock at the end of 2009, down from 18.8 percent a year earlier), Germany (13.4 percent down from 15.4 percent in 2008), France (8.5 percent, the same as in 2007), and Greece (6.6 percent, staying flat year on year).

Simona Bazavan

*FDI – According to the BNR methodology FDI includes the following: paid-up capital and the reserves related to a non-resident investor holding at least 10 percent of the subscribed share capital of a resident enterprise, the loans between the investor or other foreign enterprise in the group to which the investor belongs and the direct investment enterprise as well as the reinvested earnings.

Equity in a resident enterprise on which a foreign investor has indirect significant influence is also considered foreign direct investment. This includes equity in the subsidiaries and affiliates of a resident enterprise in which a foreign investor holds at least 10 percent of subscribed share capital.