Foreign Direct Investments in the RM. Anita Angelovska Bezhoska Vice Governor National Bank of the Republic of Macedonia October 2014

Size: px

Start display at page:

Download "Foreign Direct Investments in the RM. Anita Angelovska Bezhoska Vice Governor National Bank of the Republic of Macedonia October 2014"

Beverly Blair
5 years ago
Views:

1 Foreign Direct Investments in the RM Anita Angelovska Bezhoska Vice Governor National Bank of the Republic of Macedonia October 2014

2 Foreign Direct Investments and Economic Growth FDIs are considered an important growth engine, particularly in developing economies Capital inflow in the economy Improvement of the technological level of the economy New know-how and managerial skills in the host country Human capital development Improvement of the productivity and the competitiveness of the economy Changing of the economic structure of the host country Increasing the export potential Larger employment Creating linkages between the foreign firms and local suppliers Improving the access to international capital markets

3 FDI trends in the RM Moderate FDIs until 2007 (on average 3.3% of GDP, excluding the privatization of the electricity company in 2006) Intensified FDIs as of 2007 and surge in the inflows to 8.5% of GDP, on the backdrop of: global liquidity glut and growth of global FDIs stable macroeconomic environment improved business climate The emergence of the global crisis precluded further acceleration of inflows...yet, no sudden stop syndrome occurred - foreign investment inflows continued Foreign investments in Macedonia, an important source of financing of the current account deficit (covering 87%, on average, of the current account gap in the last ten years)

4 Structure of the FDIs (debt creating versus non-debt flows) FDI by components (as % of GDP) Equity, net Reinvested earnings, net Intercompany lending, net Direct investments, net Source: NBRM. Average Average

5 Sectoral Allocation of FDIs (tradable or non-tradable sector) Despite the slowdown of the inflows after the crisis, the quality of the inflows in the Macedonian economy improved Registered shift of inflows towards tradable sector, thus increasing the export potential of the economy Direct investment in the Republic of Macedonia, by activity (share in total FDI, in %) Average Average Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning supply Construction Total services Tradable sectors Non-tradable sectors Source: NBRM.

6 Regional Comparison The RM is lagging behind the region, although the gap has been diminishing in the recent period Different regional experience in terms of the FDI With few exceptions, the FDI pattern after the crisis similar across the region decline of inflows FDI per capita, in SEE countries (average ) FDI per capita, in SEE countries (average ) ALB BIH BGR GRC MKD SRB SVN HRV ROM ALB BIH BGR GRC MKD SRB SVN HRV ROM

The Impact of FDI on External Trade Significant impact of the new FDI on the external trade volume (35% in exports and 21% in imports) After the initial worsening due to the FDI-related import, since

7 The Impact of FDI on External Trade Significant impact of the new FDI on the external trade volume (35% in exports and 21% in imports) After the initial worsening due to the FDI-related import, since 2011 the new FDIs have been gradually improving the trade balance Improvement in the export structure - higher value added products Source: SSO External trade (annual changes, in %) I-VIII 2014 Export of goods Import of goods Trade balance I-VIII 2014 * FEZ - Free Economic Zones Source: SSO and NBRM. External trade, without FEZ * (annual changes, in %) Export of goods (without FEZ) Import of goods (without FEZ) Trade balance (without FEZ)

8 Export diversification The entrance of the new foreign investors lessened the importance of the traditional export......thus reducing the export concentration and the overall external vulnerability of the economy Export structure (share in total export, %) Average Average Source: SSO and NBRM estimates Traditional export products New export products Energy Other

Austrian FDIs in Macedonia Austrian investments - important investors in the Macedonian economy As of 2006, with the entrance in the electricity company, the Austrian share in total FDIs rose

GDP) 10,6 14,0 12,0 10,0 Stock of Direct Investments from Republic of Austria 10,5 9,4 11,3 11,5 10,5 10,1 10,8 12,2 6,0 4,0 6,3 5,6 4,2 5,2 8,0 6,0 4,0 3,3 3,9 4,2 4,0 3,3 5,0 5,4 4,8 4,9 5,3 6,3

9 Austrian FDIs in Macedonia Austrian investments - important investors in the Macedonian economy As of 2006, with the entrance in the electricity company, the Austrian share in total FDIs rose significantly and it has been stable ever since As for now, the bulk of Austrian investments concentrated in the services sector 12,0 10,0 8,0 Top 5 foreign investors ( 2013 stock of FDI, as % of GDP) 10,6 14,0 12,0 10,0 Stock of Direct Investments from Republic of Austria 10,5 9,4 11,3 11,5 10,5 10,1 10,8 12,2 6,0 4,0 6,3 5,6 4,2 5,2 8,0 6,0 4,0 3,3 3,9 4,2 4,0 3,3 5,0 5,4 4,8 4,9 5,3 6,3 2,0 0,0 Austria Greece Hungary Netherlands Slovenia Source: NBRM. 2,0 1,0 1,4 1,2 0, DI from Austria (% of GDP) DI from Austria (% of total DI) Source: NBRM.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f Looking forward The current outlook for new FDI based inflows seems favorable,

.....and the efforts of the authorities to create environment conducive to further acceleration of FDI inflows Our assessment points to an average FDI inflows in the

10 f 2015f 2016f 2017f 2018f Looking forward The current outlook for new FDI based inflows seems favorable, based on the assumption for gradual global recovery and increased investment appetite of international investors......and the efforts of the authorities to create environment conducive to further acceleration of FDI inflows Our assessment points to an average FDI inflows in the medium term up to 5% of GDP, within still brittle global recovery, but rather solid country specific fundamentals Trade balance and FDI (as % of GDP) Source: NBRM and SSO. Trade balance FDI

11 Conclusion Foreign investment prerequisite for unleashing Macedonia potential, given the potential benefits for the economy Although the FDI inflows at the wake of the global crisis decelerated, the inflows did not stop and the sectoral composition improved Despite the obvious positive impact there is still scope for reaping higher benefits through diversification of the sectoral portfolio and by enhancement of the linkages with domestic suppliers FDIs imply higher trade and financial integration which benefits the domestic economy, but also asks for higher vigilance by policymakers Sound policies (macroeconomic and structural) - key for further FDIs that will increase the long-term potential of the economy without rising its vulnerabilities

Macroeconomic Projections for 2014 and 2015

Macroeconomic Projections for 2014 and 2015 Anita Angelovska-Bezovska Vice-Governor March 2014 CONTENTS Process of macroeconomic projections and monetary policy decision-making Macroeconomic projections