vineri

29 martie, 2024

7 august, 2017

Amounts sent to the country have significantly declined over the past three years, so indicators showing the importance of this money relative to FDI have significantly deteriorated in 2017.

For the first time, the available data show a ratio of only 99% between secondary net revenues and FDI in the first five months, half of what has been recorded in 2013.

Changing the way of statistical registration complicated things, a little, in the sense that the amounts sent to the country as private transfers have been included in the secondary revenues part of the balance of payments account, along with the transfers of the public administration, which obviously did not perform at this chapter in the last period.


Changing methodology

As of 2014, the international methodological standard for establishing the balance of payments is provided by the IMF Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). To maintain and improve the coherence between international macroeconomic statistics, the manual has been developed in line with the update of the OECD Benchmark Definition of Foreign Direct Investment (BD4-2008) and the System of National Accounts 2008 (SCN 2008). The BPM6 methodology has been transposed into the European legislation by the EU Regulation no. 555/2012 on Community statistics concerning balance of payments, international trade in services and foreign direct investment.

However, there is a decreasing trend in the amounts sent to the country by those who work abroad, beyond the officially registered employment income. Income that appears in the primary income segment, according to the same BPM6 manual.

It is worth noting the advance payments sent home by other strawberry pickers who work for us, an advance that has increasingly diminished the effect of the currency sent home by our strawberry pickers (see table).


*

  • Evolution of secondary revenues and FDI (2013-2017)
  • Year
  • Secondary revenues               NET
  • INFLOW
  • OUTFLOW
  • FDI
  • Net secondary revenues/FDI
  • Inflows net secondary revenues/FDI
  • * first five months

*

Quite a bit simplistic but eloquent, it can now be said that the main external investors in Romania are no longer Romanians who send money home – an established situation in the „economic” folklore – but even the companies that develop activities in Romania (with the essential remark that the amounts obtained from the activity carried out here and reinvested appear as if it came from abroad).

And that, in the context that, if we look at the level of the FDI in the first five months of this year, it seems that we do not have the chance to replicate the situation of exceeding the four billion-euro threshold injected into our economy in 2016, which sustained the balance of payments and the exchange rate. That should not wonder us, given the frequent tax changes proposed by the government decision makers and the too rapid wage growth in the public sector, a market-maker on the labour market.

All in all, the situation seems to have changed quite a bit in relation to the previous years. Whoever had to and could leave the country already left. Some of them found somebody there, they made a family, bought a house, the relatives left in the country got fewer and fewer, and so on until the amounts sent became smaller and rarer.

What’s interesting is that, from the strictly technical perspective of the balance of payments, the public administration would have had to take over some of this decline and bring to the country some amounts to sustain the balance of payments beyond the clear negative impact on public investment.

As it would have also been important to support an exchange rate for the national currency closer to the 4.49 lei/euro level provided in the 2017 budget, needed for stability and for achieving the economic growth that would not be affected by the price increase.

Going back to the amounts sent home, there is already a dilemma about the attempts to encourage the return of some of those who previously left the country. On the one hand, they would come with the money and the experience accumulated abroad but on the other hand, they would (obviously) no longer send foreign currency to the country.

In addition, on the segment of foreign “strawberry pickers” (so to speak, obviously, as a large part of the expatriates from here have much more important positions), the increase in wages will additionally impact on the amounts left as a balance between the amounts sent in the country and the amounts sent out of the country.

The point is that the issue needs to be better thought through and optimal measures taken for the whole economy, because it is about an amount that reached last year over the dark 3 percent of GDP in terms of inflows and almost 1.5% in net terms. Which is not a small thing for the macroeconomic stability and the long-term development perspectives.

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