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

Elena Pelinescu and Magdalena Radulescu
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Magdalena Radulescu: University of Piteti, Romania

Journal for Economic Forecasting, 2009, issue 4, 153-169

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 economies’ 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: foreign direct investment; exports competitiveness; multinational companies; economic growth (search for similar items in EconPapers)
JEL-codes: E22 E52 E58 F21 F23 O11 O16 O23 O24 O33 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (28)

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