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environment.
IIF excluded reinvestment in its FDI calculations, arguing that reinvestment does not show the flow of capital into a country. Based on this adjustment, investment in the Russian economy was even lower than in Nigeria (0.3% GDP), Venezuela (0.5% GDP), and Ukraine (2.7% GDP) Taking into account reinvestment, Russian FDI averaged 1.5% GDP, higher than Saudi Arabia, Nigeria, South Korea, South Africa and Venezuela. Yet this is the lowest value for Russia in 20 years. Per Bank of Russia calculations, FDI in 2018 amounted to $8.8bn. Excluding reinvestment, it was -$6.5mn, the worst since 1997.
Foreign direct investment in 2018 fell to its lowest level in a decade, but FDI in the non-banking sectors of Russia for the first quarter of 2019 increased by more than eight-fold compared to the fourth quarter of last year - to $11.5bn, according to the bulletin of the Central Bank's research and forecasting department. This improvement is partly due to the recovery of investments in debt instruments, noted in the Central Bank. However, it is premature to talk about a steady revival of foreign investment in the non- banking sectors, because a significant proportion of such investments was associated with individual intra-group transactions of large companies. What transactions are we talking about, analysts do not specify. If one excludes these transactions, the dynamics of foreign investment in the Russian economy in the first quarter of 2019 improved slightly compared with the previous quarters, according to the Central Bank. At the same time, in the third and fourth quarters of last year, the dynamics of almost all foreign investments deteriorated. In general, according to preliminary data, the flow of foreign direct investment in Russia in 2018 declined to $8.8bn from $28.6bn a year earlier – the lowest level in the last 10 years. The main role in the deterioration of the dynamics of foreign investments was played by investments in the non- banking sector.
Russia remained one of the 10 most popular destinations for foreign investment in Europe in 2018, according to the rating by Ernst & Young cited by RBC business portal. Russia was ranked ninth as the most attractive investment destination in Europe, despite the decline of foreign investment projects from 238 in 2017 to 211 in 2018.
The industry breakdown places industry and manufacturing as the most attractive industry in Russia for foreign investment, but the number of projects in the segment fell by 29% to 127. In sales and marketing the number of projects doubled to 41.
Notably, the investment from the US increased by 74% to 33 projects, accounting for 16% of all foreign investment projects in Russia. German investment projects followed (down by 14% to 24). Investments from China and UK declined notably (from 32 to 19 and from 8 to 2, respectively).
RBC notes that the data in Ernst & Young report does not correspond to the official Central Bank of Russia (CBR) data, which also accounts for investment and loans from domestic offshore-based businesses. The CBR also does not account for investment of the subsidiaries of foreign companies in Russia.
Foreign Direct Investment (FDI) in the share capital of Russian non-financial sector companies in 2018 declined by $6.5bn (outflow of $22.4bn versus inflow of $15.9bn), which was the lowest indicator since 1997, according to the data
49 RUSSIA Country Report July 2019 www.intellinews.com