The Impact of Foreign Direct Investment on the Economic Growth and Countriesí Export Potential

by Pelinescu, Elena and Radulescu, Magdalena
Published in Romanian Journal of Economic Forecasting
, 2009, volume 12 issue 4, 153-169

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Abstract

Most of the FDI specialists  think that FDI had a positive impact upon  the economic growth in the receiving countries. They  showed that it was a direct relation  between the FDI flows (as percent of the GDP) and  the growth of GDP per capita not just for the developed countries, but also for  most of the developing countries. In this  way, the countries that had attracted an important  FDI volume had the highest economic growth rates. Since the early '60s of the  20th century, the times with the most  intense foreign investment activities had  coincided with a sudden increase in the macroeconomic indicators (especially the  GDP). Because the economic science proved that  there was a direct connection between the FDI volume and economic growth rates, the  IMF and the World Bank started to recommend to all countries  (recommendation that they make currently)  to create favorable conditions to attract FDI for  ensuring, in this way, high development  rates. The countries in transition need FDI not  just to produce more goods and a higher quality. Foreign capital investments are  the most efficient and safe way to  integrate into the world economy. Concluding, only  direct foreign investments would allow  the re-specialization of the economy to  surpass the situation of maintaining on  the world markets only with food products and raw  materials. Indeed, the acquired experience shows  that FDI substantially enhanced the  national economiesí re-specialization processes  all over the world. The authors share the opinion of those specialists who affirm  that FDI plays a determinant role in  respecializing the transition economies and in  increasing the export potential. Also,  FDI growth leads to increase in the  manufactured production quantity. Further, we shall examine some structural  changes which occurred under the influence of FDI in the economies of new  European Union member states (the Czech  Republic, Estonia, Hungary, Lithuania,  Latvia, Poland, Slovakia, and Slovenia)  and in South-East Europe, drawing also the  attention upon the changes in the export potential of those countries.

Keywords: natural gas prices, production  by industries, energy supply, aggregate  domestic consumptionforeign direct investment, exports competitiveness, multinational companies, economic growth
JEL Classification:
E22, E52, E58, F21, F23, O11, O16, O23, O24, O33