Foreign Direct Investment (FDI) reached EUR 1.27 billion during the first ten months of 2012, maintaining an ascending trend as compared to 2011. This opens the way for an overall end-of –year FDI result for 2012 that surpasses the 2011 figure, despite the negligible economic growth for the reference period.

“We might be in for a nice surprise from direct foreign investments towards the end of the year as they may exceed the 2011 value,” said Eugen Sinca, BCR analyst. “A much awaited re-balancing of the political environment, the gradual reduction of inflation pressures and the new progress made in public sector reform may re-fuel investors’ interest”, added Sinca.

Last year, Romania recorded 2.5 percent economic growth, while the 2012 estimate for this indicator has been adjusted to 0-0.5 percent, with GDP contraction still among the possible scenarios. FDI in Romania has only managed to cover a third of the current account deficit.

FDI is defined by the National Bank of Romania (BNR) as “a long-term investment relationship between a resident and a non-resident entity [….] [which] usually presupposes that the investor exert a significant managerial influence within the company it has invested in”. According to the 2011 version of an annual statistical study of FDI in Romania conducted by BNR , there are three main FDI types, namely greenfield investments, which see foreign investors start up a business in Romania either alone or together with other foreign investors, mergers and acquisitions, following which foreign investors take Romanian businesses over, either partially or in full, and business development, consisting of increases in the share capital held by foreign investors in Romanian businesses.

The net FDI flow for 2011 reached EUR 1.815 billion and was structured as follows: 83.3 percent went to foreign investors’ direct net contributions to the capital of businesses set up as foreign investments in Romania, while 16.7 percent accounted for the net credit received by such businesses from foreign investors.

Ioana Jelea ioana.jelea@romania-insider.com

picture source: sxc.hu