bne IntelliNews – Central bank survey shows FDI in Romania is mainly reinvested earnings
Foreign direct investors in Romania made 9 billion euros in net profits and 2.74 billion euros in losses, a combined figure of 6.26 billion euros (almost 2.9% of GDP) in 2020, according to a survey carried out by the National Bank of Romania (BNR) in cooperation with the National Institute of Statistics (INS).
Foreign direct investors also received € 0.59 billion in net interest from loans granted to local subsidiaries. This translates into a total of 6.85 billion euros (almost 3.2% of GDP) in net income earned by FDI investors from their Romanian subsidiaries.
This was the main source of foreign direct investment (FDI) in Romania, as “new FDI”, that is to say investments in shares by incumbent foreign investors or new investors, represented less. one billion euros.
Profits reinvested over 12 rolling months (counted as FDI) increased from 511 million euros in 2015 to 2.78 billion euros in 2019 and rose again above 3 billion euros in 2020. This has was possible thanks to a growing pool of profits generated by FDI companies active in Romania. According to more recent data, the volume of profits reinvested by FDI companies in Romania more than tripled in annual terms to reach 1.74 billion euros in January-June
Of the € 9.00 billion in combined net profits generated by FDI companies in 2020 (those that reported profits last year), € 3.00 billion were retained (as opposed to distributed to foreign shareholders).
This represents half of the overall profits made by FDI firms last year.
In addition, FDI investors reduced their net loans to Romanian subsidiaries by 1 billion euros. Under BOP6, this counts as negative foreign direct investment.
The “genuine” FDI, namely the new shares, amounted to just under € 1 billion.
BNR reports an overall figure of FDI inflows of 3 billion euros, against 5.2 billion euros in 2019: 3 billion euros of reinvested profits plus 1 billion euros of contributions in equity minus € 1 billion change in loan balances.