Foreign direct investment (FDI) shrank in Romania and neighbouring Bulgaria in the first quarter, data showed on Monday, potentially harming recovery prospects for the European Union's poorest emerging economies.FDI was negative in Bulgaria and halved in Romania, according to data from the two recession-hit countries. They are more exposed to debt problems in Greece than other emerging EU countries as Greek bank lending in the region is mainly concentrated in the two countries.Bulgaria's FDI, a driver of growth in recent years, plunged to minus 21.9 million euros at the end of March from plus 926 million in January-March 2009, as Bulgarian branches of foreign processing and trade units paid back loans to parent companies."The negative FDI is worrying because Bulgaria needs investment to return to growth," said Georgi Angelov, an analyst at the Open Society Institute in Sofia, a think tank.FDI to Romania fell to 754 million euros from 1.48 billion in January-March of last year.Appetite for investing in Romania has been falling mostly due to uncertainty over the centrist government's ability to finance a ballooning budget deficit."It's premature to anticipate the impact of FDI," said Ionut Dumitru of Raiffeisen Bank in Bucharest. "But it's clear the sentiment of investors has yet to improve substantially."Analysts say Bulgaria, among the last states in eastern Europe to enter recession, should see slight growth of up to 0.3 percent this year, while Romania is expected to record flat growth after a painful 7.1 percent contraction last year.LOWER REMITTANCESData also showed Romania's current account deficit widened 65.5 percent year-on-year to 1.5 billion euros ($1.9 billion) in the first quarter as remittances from workers abroad fell.One in 10 Romanians have gone to work abroad in recent years, mainly in Spain and Italy, countries which are now under pressure to introduce austerity measures to reduce debt. This is being reflected in lower wages and higher unemployment.Bulgaria's current account deficit shrank 66 percent on the year to 490 million euros.Further west, the Czech current account showed a surprise 12.6 billion crown ($626.9 million) deficit in March due to foreign-owned companies' dividend payments, reversing a 10.25 billion crown surplus in February."What is more striking is the balance of services posted a deficit, the first negative figure I've seen in years. This will have direct implications for GDP in the first quarter," said Pavel Sobisek, chief economist at Unicredit in Prague.The Czech Republic saw a net outflow of direct investment totalling 1 billion crowns and was affected in particular by capital outflows to foreign parent firms.(Additional reporting by Irina Ivanova and Tsvetelia Tsolova in Sofia and Jason Hovet in Prague; Editing by Susan Fenton)News posted by www.newsinfoline.com
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