The net foreign direct investments (FDI) to Romania contracted in absolute terms by 7% y/y to under EUR 6 billion in 12 months to November 2024, while the FDI to GDP ratio dropped to 1.7% from 2.2% in the previous 12-month period, according to data published by the central bank (BNR).

The FDI thus covered only a small part of the current account, which widened to 7.9% of GDP in the same 12-month period. In contrast, the gross external debt increased by EUR 19.2 billion over the 12-month period, which accounts for 5.3% of the 2024 GDP. 

Out of the EUR 19.2 billion rise in Romania’s external debt over the 12 months to November, EUR 14.7 billion is attributable to the state (public external debt). Another EUR 1.9 billion was the rise in the intra-group debt owed by FDI companies in Romania to their parent groups. 

The genuine net FDI to Romania shrank three times to only EUR 714 million (0.2% of GDP) in 12 months to November 2024, reaching one of the lowest values (in absolute terms) in the past years seen only during the Covid-19 pandemic or after the outbreak of the war in Ukraine. The bulk of the FDI in the 12 months was made up of reinvested earnings: EUR 4.5 billion (-13.2% y/y) out of the EUR 11.7 billion profits generated by the FDI companies in the period (with the rest being repatriated). 

The bleak economic outlook and the gradual phasing off of fiscal incentives are likely to negatively affect the FDI regarding both new equity and reinvested earnings in the coming year.

iulian@romania-insider.com

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