Slow recovery in foreign direct investment for Eastern Europe

Economies in Central and Eastern Europe grew strongly in the 2000′s, fueled by cheap credit from Western banks who saw the region as a superb investment opportunity. As my recent editor’s blog entry suggests, newly-found political stability and high levels of economic growth made investing there seem like an obvious choice. Vast sums of money flowed in, fueling a property boom based on easy credit. When the banks pulled out, parts of the region were left high and dry.

As economies contracted, so did the chemical industry and there were some high profile victims such as Czech resin producer, Spolchemie, and Hungary’s PVC-maker BorsodChem.

Now a new report by PWC suggests there will be a gradual recovery in foreign direct investment in CEE by 2013.

Here are some of the key findings:

- The central and eastern Europe (CEE) region experienced a five-fold increase in foreign direct investment (FDI) inflows between 2003 and 2008, rising from US$30 billion to US$155 billion. Russia was the destination which attracted much of this additional investment as its inflows rose from less than US$8 billion in 2003 to more than US$70 billion in 2008.

- The credit crunch and recession that ensued coincided with a collapse of FDI inflows to the CEE region. In the region as a whole, FDI inflows were 50% lower in 2009 when compared to 2008.

- PWC estimates that FDI to CEE declined from US$155 billion in 2008 to US$77 billion in 2009. Looking ahead, FDI is projected to recover only modestly from 2010 onwards and could reach around US$172 billion by 2014.

Here is the report:

 

PWC FDI in CEE Eport – March 10

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