Foreign direct investment (FDI) was left behind this year by the amounts of money coming from the Romanians working abroad.
The capital inflows from current transfers make up for the modest capacity to attract investments, which posted only a slight improvement in 2002. However, the transfer money cannot replace direct investment, since it cannot play the same role in the economy. Should this happen, many risky anomalies are bound to occur.
For now, the official results of this trend show into a nine-month current deficit still below one billion dollars. Nothing alarming at first sight.
Still, potential problems can spring from the fact that the money sent by the Romanians working abroad is not channeled to investments or the launch of new business, but to consumption, which boosts consumption and, implicitly, inflation.
"These transfers are good for the economy, as they help the balance and make up for the lack of domestic money. The only problem is these transfers are very hard to estimate. No one can predict their pace and surprises can always occur," says Lucian Liviu-Albu, head of the Prognosis Institute of the Romanian Academy.
Moreover, this source of currency inflows translated into a significant effort by the central bank, in an attempt to contain the appreciation trend of the domestic currency.
According to available data, net currency inflows unrelated to the administration had come to total 923 million dollars after the first nine months of the year. Given the growth pace, which picked up in recent months, Romanians are expected to send back some 1.3 billion dollars.
At the same time, nine-month FDI merely amounted to 741 million dollars, while the yearend outlook is grim. Marian Saniuta, chairman of the Romanian Agency for Foreign Investment, believes that 2003 will be a record year for foreign investments in Romania.
Transfer inflows have proved rather volatile in the past years, which makes it difficult to pin down a certain pattern.
"Everybody knows why foreign investment is so small. Bureaucracy and corruption are to blame. On the other hand, money transfers are growing, because immigration is increasing and more Romanians choose to go and work abroad," says Mihai Sfintescu, CA/IB Romania director.
Countries such as Serbia and Turkey have experienced similar situations in the past few years, when transfers seemed set to replace direct investment.
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
