Foreign Direct Investment [FDI] in Romania turned negative in the first quarter of this year as multinationals halted their investments and asked their local subsidiaries to pay back their loans.

Romania's National Bank (BNR) announced that the flow of direct investment to Romania recorded a negative net value of EUR 551 million in the first quarter of 2020. In the first quarter of 2019, Romania recorded net inflows of EUR 1.24 billion.

Equity investments made by foreign companies in Romania (including reinvested profits) recorded a positive net value of EUR 248 million (inflows). Meanwhile, intercompany lending recorded a negative net value (outflows) of EUR 799 mln.

More detailed information shows outflows of over EUR 1 billion in February-March generated by the decrease in the credit extended by foreign parent groups to local subsidiaries.

In related news, Romania's current account deficit widened by 22% in the first three months of the year (Q1) compared to the same period last year, to EUR 1.37 billion, BNR announced on May 14.

The gap is seasonally small in the first quarter of the year, and the current account deficit is no longer among the main macroeconomic threats. Economists are more concerned about sudden flows that might create liquidity, public financing, and exchange rate tensions.

"We expect the adjustment of the current account deficit to an average level of 2.3% of GDP in the period 2020-2022 [from nearly 5% of GDP in recent years]," commented Andrei Radulescu, chief economist of Banca Transilvania.

Romania's external debt decreased by EUR 4.4 bln in March compared to February, to EUR 106.2 bln at the end of the month.

editor@romania-insider.com

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