STUDY ON NET INVESTMENT IN THE NATIONAL ECONOMY IN 2017

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1 STUDY ON NET INVESTMENT IN THE NATIONAL ECONOMY IN 2017 Assoc. prof. Mădălina-Gabriela ANGHEL PhD Artifex University of Bucharest Prof. Constantin ANGHELACHE PhD Bucharest University of Economic Studies / Artifex University of Bucharest Prof. Radu Titus MARINESCU PhD (radu_titus_marinescu@yahoo.com) Artifex University of Bucharest ec. Ștefan Gabriel DUMBRAVĂ(stefan.dumbrava@gmail.com) Abstract As we know, economic growth can be achieved either on the account of consumption or on the account of investment, access to community funds or the middle, mixed, by establishing realistic proportions between consumption and investment so as to ensure an increase in the level of living as well as increasing job-creating investments to absorb the unoccupied population, to create a wider tax base and much more. In this article I made a study on the net investments made in the national economy that were materialized in new construction works, the purchase of machinery, including means of transport, as well as other expenses that are made in this field. Also, referring to housing construction, it was mentioned how it evolved in the fourth quarter of 2017 as compared to 2016, how it evolved throughout the year, and especially how these investments materialized in finished work on environments residence and funding resources, with the emphasis being on the fact that there is a higher share of urban investment in the construction of housing. Further analysis of the housing completed by development regions was made, emphasizing that Bucharest-Ilfov, the North West and the North-East area were the most active in developing such investments. In the study, the authors used a series of data published by the National Institute of Statistics, revealing on the basis of series of data and graphic representations the issues discussed in this article. It is revealed that in principle these investments have increased with the exception of the fourth quarter of 2017, when compared to the same quarter of 2016, both in urban and rural areas but also in the use of private and public funds - have registered some decreases. Probably this is also due to the fact that climate factors, temperatures, and so on. did not make it possible to use the possibilities of continuation of construction works. The study is balanced and reveals successive developments in this area, based on seasonally adjusted gross or series data. 234 Romanian Statistical Review - Supplement nr. 3 / 2018

2 Keywords: investment, fi nancing, direct foreign investment, profi tability, economic growth JEL Classification: E22, R11, R53 Introduction The article studies the evolution of investments in the national economy and here we refer to public investment and private investment. As part of private investment, we have generally considered domestic investment or foreign direct investment, but the emphasis has been put on highlighting how this field has evolved. Successively, we referred to the net investments made in the national economy, then to net investments by activities of the national economy in 2017 as compared to 2016, emphasizing the way these investments evolved in trade and services, industry, construction, agriculture or other industries. We remember that the fewest investments were made in agriculture, with rises being lower than in other areas. It is necessary to use the Community funds granted to farmers in the form of subsidies to ensure more active investment growth also in this area. Next, the article refers to the year 2017 where a higher number of dwellings was achieved, with 1095 more than in The analysis is carried out on geographic, economic development, urban, rural, financing (from private or public funds), also pointing to a significant increase in private funds and a more moderate increase in public investment in The article is accompanied by a series of significant graphical data and representations suggesting that, along with investments which have been made clearly in this activity, how the net investments evolved and how they materialized in the activity of the national economy. Literature review Aisen and Veiga (2013) tried to identify the extent to which political instability influences economic growth. Alfaro, Chanda, Kalemli-Ozcan and Sayek (2004) analyzed the role of local financial markets in the relationship between foreign investment and economic growth. Anghelache, Jweida, Popovici and Stanciu (2016) studied the link between foreign direct investment and exports to Romania. Anghelache, Partachi, Sacala and Ursache (2016) analyzed the correlation between the evolution of the Gross Domestic Product and the foreign direct investments using the econometric models. A similar theme was approached by Anghelache, Anghelache, Anghel and Dinu (2013). Anghelache, Anghelache, Niță and Sacala (2015) conducted a research on the development of FDI flows. Blonigen, Davies, Waddell and Naughton (2007) studied the use of autoregressive models in foreign investment analysis. Bouieder - Bensebaa (2005) studied the evolution of foreign direct investment Revista Română de Statistică - Supliment nr. 3 /

3 in Central and Eastern European countries. Carkovic and Levine (2005) studied how foreign direct investment accelerates economic growth. Cicak and Soric (2015) studied the relationship between foreign direct investment and gross domestic product in European transition countries. Popielas (2012) analyzed the possibility of harmonizing investment services in the European Union. Research methodology, data, results and discussions The analysis of the evolution of net investments is important in the context in which, following the economic and financial crisis, it is necessary to stimulate this activity. Quarterly analysis shows that in the fourth quarter of 2017, there was an increase of 13.5% compared to the fourth quarter of Throughout 2017, net investment in the national economy was million lei, which is an increase of 6.4% compared to In table no. 1 shows the net investments made in the fourth quarter of 2017, on the structure: new construction works, machinery and others, reported in the same quarter of Net investments made in the national economy 2017 in% versus Quarter - million lei current IV 2016 prices - Table no. 1 Structure -%- Quarter 2016 Quarter 2017 TOTAL 28274,6 113,5 100,0 100,0 New construction works 11840,7 113,0 40,6 41,9 Machinery (including means 11004,2 102,3 44,2 38,9 of transport) Other expenses 5429,7 143,2 15,2 19,2 Source: National Institute of Statistics, Press release no. 57/9 March 2018 Studying the data in the table shows that in the fourth quarter of 2017, compared to the same quarter of 2016, the net investments in the national economy registered an increase of 13.5%, the growth being manifested in all the elements of structure: other expenditures 43.2%); new construction works (13.0%); machinery, including means of transport (2.3%). The structural presentation of net investments by structural elements is also shown in chart no. 1, below: 236 Romanian Statistical Review - Supplement nr. 3 / 2018

4 The share of net investment in structural elements in the fourth quarter of 2017 compared to the fourth quarter of 2016 Chart no. 1 procente Lucrari de constructii noi Utilaje (inclusiv mijloace de transport) Alte cheltuieli trim.iv 2016 trim.iv 2017 Next, it is necessary to deepen the analysis of the net investment situation performed throughout the year 2017, the data being compared with those obtained in In table no. 2 these results (data) are synthesized.. Net investments made in the national economy Year million lei current prices - in % compared to 2016 Table no. 2 Structure (%) Year 2016 Year 2017 Total 77964,9 106,4 100,0 100,0 New construction works 35522,4 104,9 44,8 45,6 Machinery (including means of transport) 32255,2 103,9 43,2 41,4 Other expenses 10187,3 117,4 12,0 13,0 Source: National Institute of Statistics, Press release no. 57 / 9 March 2018 We find that in 2017, as compared to 2016, the net investments made in the national economy recorded an increase of 6.4%, an increase in all structural elements, as follows: other expenditures (17.4%), works new construction (4.9%) and machinery, including means of transport (3.9%). The data in table no. 2 are more suggestively highlighted by graphical representation, see graph no. 2. Revista Română de Statistică - Supliment nr. 3 /

5 Share of net investment in structural elements in 2017 compared to year 2016 Chart no. 2 procente Lucrari de constructii noi Utilaje (inclusiv mijloace de transport) Alte cheltuieli anul 2016 anul 2017 Also relevant is the comparison regarding the structure of net investments by branches of the national economy in 2017 compared to the year Thus, by activities of the national economy in 2017, compared to 2016, there was an increase of the share of net investments in construction, by 7.1 percentage points. 33.4% of net investment were industry-driven, up 0.3 percentage points from year On the basis of data provided by the National Institute of Statistics, the structural evolution of net investments in 2017 compared to 2016 was plotted graphically. Structure of net investments by activities of the national economy in the year 2017, compared to 2016 Chart no. 3 Comert/Servicii Industrie Constructii Agricultura Alte ramuri anul 2016 anul Romanian Statistical Review - Supplement nr. 3 / 2018

6 It is worth noting that from a methodological point of view, net investments represent the expenditures for the creation of new fixed assets, the development, modernization and reconstruction of the existing ones, as well as the value of the services related to the transfer of ownership over the existing fixed assets and paid land from other units or from the population. Evolution of investments in housing construction and concrete results obtained in 2017 Housing construction continues to be a priority area of activity in Romania. The quarterly and year-on-year analysis of 2017, compared with the same year-ago period in 2016, highlights annual increases, but reductions in the fourth quarter. Thus, in the fourth quarter of 2017, dwellings were in use, decreasing by 1320 dwellings compared to IV quarter 2016, while dwellings were terminated throughout the year 2017, rising by 1095 dwellings compared to In table no. 3 shows the situation of dwellings completed in the fourth quarter of 2017, by area (rural, urban) and by sources of financing. Finished dwellings, by residence area and sources of financing Table no. 3 Finished dwellings Structure - număr - - % compared to 2016 (+/-) TOTAL ,0 100,0 Urban area ,3 46,7 Rural area ,7 53,3 of total: Private funds ,6 96,5 Public funds ,4 3,5 Source: National Institute of Statistics, Press release no. 56 / 9 March 2018 Studying the data in this table shows that the number of dwellings built in the urban area by 13.4% and in the rural area by 4.0%, in the fourth quarter of 2017 compared to IV quarter 2016, Compared to the fourth quarter of 2016, in the fourth quarter of 2017, the distribution of finished housing financing funds shows that the number of dwellings made from private funds decreased by 1129 dwellings, and from public funds decreased by 191 dwellings. The analysis of the situation of completed dwellings was also done by development regions. Based on the official data of the National Institute of Statistics, included in table no. 4, the graphical representation in graph no. 4. Revista Română de Statistică - Supliment nr. 3 /

7 Finished dwellings by development regions Table no. 4 Structure - % - Finished dwellings - number compared to Quarter IV 2016 (+/-) TOTAL ,0 100,0 Nord Est ,0 17,6 Sud Est ,6 10,3 Sud - Muntenia ,8 12,4 Sud Vest Oltenia ,8 4,5 Vest ,0 10,1 Nord Vest ,5 17,9 Centru ,8 12,2 Bucureşti - Ilfov ,5 15,0 Source: National Institute of Statistics, Press release no. 56 / 9 March The survey shows that regional distribution shows a decrease in the total number of dwellings with 1320 dwellings, a decrease reflected in the following development regions: South-East (-494 dwellings), Bucharest-Ilfov (-418), North - East (-292), South - West Oltenia (-114), Center (-88) and Northwest (-31). Increases were registered in the South-Muntenia development regions (+71 dwellings) and West (+46). Finished dwellings by development regions Chart no. 4 number 240 Romanian Statistical Review - Supplement nr. 3 / 2018

8 In the case of completed dwellings, it is also important to analyze by medium (rural, urban) and sources of financing. Data on these two aspects are included in Table no. 5. According to the residence area, in 2017 as compared to 2016, the share of completed dwellings in the urban area (54.9%) and the decrease in the rural area (45.1%) was registered. Finished dwellings by residence area and sources of financing Table no. 5 Structure Finished dwellings - % - - number compared to 2016 (+/-) TOTAL ,0 100,0 Urban area ,4 54,9 Rural area ,6 45,1 of total: Private funds ,6 96,7 Public funds ,4 3,3 Source: National Institute of Statistics, Press release no. 56 / 9 March 2018 The distribution on end-of-life financing funds shows that compared to 2016, in 2017, both the number of dwellings made from private funds with 554 dwellings and the number of dwellings made from public funds with 541 dwellings increased. By region of development, the situation is presented in table no. 6 and the representation in graph no. 5. Finished dwellings by development regions Finished dwellings - number - year 2017 compared to 2016 year 2016 (+/-) Table no. 6 Structure - % TOTAL ,0 100,0 North - East ,1 15,2 South East ,3 11,4 South - Muntenia ,2 10,0 South - West Oltenia ,5 4,3 West ,2 9,7 Northwest ,6 17,8 Center ,9 13,7 Bucharest - Ilfov ,2 17,9 Source: National Institute of Statistics, Press release no. 56 / 9 March 2018 Revista Română de Statistică - Supliment nr. 3 /

9 Finished dwellings by regions of development Chart no. 5 -număr- The regional distribution reflects an increase in the number of completed dwellings in the following development regions: Center (+1107 dwellings), North West (+824), West (+347), South-East (+168) and South Muntenia (9). Declines occurred in the North-East development regions (-844 dwellings), Bucharest - Ilfov (-489) and South-West Oltenia (-27). Conclusion From the data presented, it is clear that in 2017 investments were made higher than in 2016 as well as in previous years. It follows that increased attention has been paid to housing construction, the procurement of fixed assets, including transport, but also insignificant investments in infrastructure and in some areas of activity. The data suggests the authorities concern to increase these investments, but also the possibility of ensuring growth by gradually moving to a system of consumer and investment-driven growth. Another conclusion is that greater attention should be paid to attracting community funds that are also used on the basis of specific projects that are convincing in each field, but especially the harmonization of legislation that will become attractive to foreign investors. We note that along with the outstanding results in housing construction and others in this field, investments must refer to the whole economy and must be used to ensure a sustained growth of the national economy, both overall and in its structure. 242 Romanian Statistical Review - Supplement nr. 3 / 2018

10 Bibliografie 1. Aisen, A. and Veiga, F.J. (2013). How does political instability affect economic growth?. European Journal of Political Economy, 29 (C), Alfaro, L., Chanda, A., Kalemli-Ozcan, S. and Sayek, S. (2004). FDI and economic growth: the role of local financial markets. Journal of International Economics, 64, Anghelache, C., Jweida, I.J., Popovici, M. and Stanciu, E. (2016). Analysis of the correlation between direct foreign investment and export. Romanian Statistical Review, Supplement, 10, Anghelache, C., Partachi, I., Sacală, C. and Ursache, A. (2016). Using econometric models in the correlation between the evolution of the Gross Domestic Product and Foreign Direct Investments. Romanian Statistical Review, Supplement, 10, Anghelache, C., Anghelache, G.V., Niță, G. and Sacală, C. (2015). Study on evolution of foreign direct investment flows model analysis, Romanian Statistical Review Supplement, 10, Anghelache, C., Anghelache, G.V., Anghel, M.G. and Dinu, A.M. (2013). Evolution of GDP and Foreign Investments. Romanian Statistical Review, Supplement, 4, Blonigen, B., Davies, R., Waddell, G. and Naughton, H. (2007). FDI in space: Spatial autoregressive relationships in foreign direct investment. European Economic Review, 51 (5), Boudier Bensebaa, F. (2005). FDI-asissted development in the light of the investment development path paradigm: Evidence from Central and Eastern European countries, Conference L'AFSE, Clermont Ferrand, Transnational Corporations, 17 (1), Carkovic, M. and Levine, R. (2005). Does foreign direct investment accelerate economic growth, Institute of International Economics Press, Washington DC, Cicak, K. and Soric, P. (2015). The Interrelationship of FDI and GDP in European Transition Countries. International Journal of Management Science and Business Administration, 1 (4), Popielas, M. (2012). Harmonization Of Investment Services In The European Union - The Example Of Investment Funds, Oeconomia Copernicana, 3 (1), Institutul Național de Statistică, Comunicatul nr. 56 / 9 martie Institutul Național de Statistică, Comunicatul nr. 57 / 9 martie 2018 Revista Română de Statistică - Supliment nr. 3 /