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Reduction with a positive position in Foreign Direct Investment

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Foreign Direct Investments decrease with a positive position

The net foreign direct investment (FDI) position of Cyprus decreased in 2019, although it still remains at positive levels, according to data released by the Central Bank of Cyprus on Tuesday.

Specifically, the net FDI position in 2019 amounted to € 8,200.9 million, compared to € 15,404.2 million in 2018, which is due to the fact that incoming FDI increased more than outgoing FDI.

The stock of outgoing FDI reached € 409,980.3 million in 2019, compared to € 394,276.8 million in 2018. This increase is attributed to the increase in equity securities while debit instruments recorded a slight decrease. The majority of stocks of outgoing FDI in 2019, consisted of equity securities (92%) and, to a lesser extent, debit instruments (8%). The composition of outgoing FDI does not show substantial changes over time, with equity securities always remaining above 90%.

The stock of incoming FDI amounted to € 401,779.4 million in 2019, compared to € 378,872.6 million in 2018. This development is due to the increase in equity securities while on the contrary debit instruments decreased. Regarding the composition of incoming FDI in 2019, it consisted of 81% equity securities and 19% debit instruments. As in the case of outgoing FDI, the composition of incoming investments does not show substantial changes over time, with the share of equity securities in the stock of inbound FDI ranging between 78% – 86%.

Regarding the increases in the stocks of outgoing and incoming FDI in 2019, these are mainly due to increases recorded in transactions, although they were mitigated by reductions recorded in other changes. In contrast to 2019, the increases in the stocks of outgoing and incoming FDI in 2018 were mainly due to the increases due to changes in exchange rates.

Transactions

Net FDI transactions in 2019 continued, for the fourth consecutive year, to be negative. Specifically, net FDI transactions in 2019 were recorded at – € 5,311.8 million, as there was an increase in FDI inbound transactions which exceeded the increase in outbound FDI transactions.

Regarding the FDI outgoing transactions for 2019, these amounted to € 18,077.1 million, of which € 22,994.1 million were transactions in equity securities except for reinvested earnings. Reinvested earnings as well as transactions with debit instruments were negative. Inbound FDI transactions amounted to € 23,388.9 million in 2019, consisting mainly (€ 22,161.6 million) of equity securities excluding reinvested earnings.

Income

Net FDI revenues were marginally negative in 2019 (ie FDI payables exceeded FDI revenues) after six consecutive years of positive results.

Specifically, net FDI revenues were recorded at – € 25.2 million in 2019, recording a decrease from € 347.9 million in the previous year.

Regarding the income from the outgoing FDI, this amount amounted to € 11,414.9 million in 2019, compared to € 23,907.9 million in 2018. This decrease is mainly due to the decline in equity income excluding reinvested earnings (dividends), by € 10,468.1m.

Income from FDI amounted to € 11,440.1 million in 2019, compared to € 23,560.0 million in 2018. This deterioration is due to the reduction of equity income excluding reinvested earnings by € 7,595.3 million and, to a lesser extent, in the reduction of reinvested profits, by € 4,474.9 million.

The above analysis shows that, compared to 2018, profitability (rate of return) in 2019 deteriorated, both for outgoing and incoming FDI. In particular, the rate of return in 2019 was 2.8%, for both outgoing and incoming FDI, while the corresponding rate of return in 2018 was 6.1% for outgoing investments and 6.2% for inbound investments.

Outgoing FDI stock

Cyprus' outgoing FDI stock in 2019 was spread across at least 135 countries, while inbound FDI stocks were channeled to Cyprus from at least 160 countries. Of these, 123 are common to both outgoing and incoming FDI.

Although the number of partner countries, both for incoming and outgoing FDI, is large, there is a large concentration in a small number of countries. More specifically, the top ten countries of the incoming and outgoing FDI stock account for more than 86% of the total allocated reserves, with Russia being the leading partner.

Analysis by economic activity

Most of the incoming FDI stocks of Cyprus were channeled to the tertiary sector (ie Services). Specifically, the stocks of incoming FDI that were channeled to the tertiary sector in 2019 amounted to € 399,161.5 million, increased compared to € 377,037.9 million in 2018. Most of the investments in the tertiary sector concern financial and insurance services. This reflects the specialization of Cyprus in the provision of financial services.

Regarding the primary and secondary sector, total investments amounted to € 1,222.0 million in 2019, compared to € 675.8 million in 2018.

With regard to outgoing FDI, they are channeled mainly to the tertiary sector. Specifically, the outgoing FDI reserves in the tertiary sector amount to € 167,443.9 million in 2019, compared to € 163,132.7 million the previous year. Most of the investments in the tertiary sector are related to financial and insurance activities.

The primary and secondary sectors amounted to € 146,145.7 million in 2019, from € 140,446.9 million in 2018. It is noted that an amount of € 96,382.2 million in the outgoing FDI of 2019 remains unallocated to a specific economic activity.

Philenews / ΚΥΠΕ

Source: www.philenews.com

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