Non-residents' direct investments in Romania (net FDI) rose by 10% y/y to €4.56bn in January-October 2018, the central bank announced. But the figures are mixed and long-term (equity) investments are stagnating at best, with inter-company lending substituting for them.

In the rolling 12 months ending October, net FDI remained virtually flat from the previous 12 months, at €5.2bn. Furthermore, non-residents’ equity investment in Romanian companies dropped by 26% y/y to €3.96bn in the 12-month period, while the local subsidiaries of foreign groups borrowed €1.24bn (that counts as FDI as well) from parent companies compared to the €177mn returned during the previous 12-month period.

The FDI-to-GDP ratio thus reached 2.3% in January-October and foreign direct investments still covered a significant part of the current account deficit reported at 4% of GDP for the same period. Equity investments, including estimated net reinvestment of earnings, amounted to €3.59bn — virtually unchanged from the same period last year, while inter-company lending (loans contracted by local subsidiaries from parent groups abroad) surged by 74% compared to last year and recorded a net value of €972mn.

In other words, the inflow of long-term FDI (invested in equity) in January-October was more or less the same as last year but local companies (subsidiaries of multinational groups) have borrowed more from their parent groups.

Separately, the FDI stock held by non-residents in Romania increased to €73.3bn (37% of GDP) at the end of September after having advanced by €6.6bn (or by 10%) over the previous 12 months.