South-East Europe about to become growth leader in Central and Eastern Europe
- Economic dynamism stronger than in EU accession candidate countries.
- Banking market with high growth potential.
South-East Europe (SEE) has in recent years become the undisputed leader in terms of economic growth among the emerging markets in Central and Eastern Europe (CEE). The SEE region comprises the two EU accession candidates scheduled to join the EU in 2007 Bulgaria and Romania. as well as Croatia, Serbia and Montenegro, Albania, Bosnia and Herzegovina and Macedonia. In 2002 the SEE region registered average economic growth of 4.5 per cent, compared to 2.4 per cent average growth for the group of the eight EU accession candidates from Central and Eastern Europe. "Growth in SEE thus was almost twice as strong as in the eight CEE countries which will join the European Union in 2004," said Marianne Kager, Chief Economist of Bank Austria Creditanstalt (BA-CA), at the World Economic Forum in Athens.
While the region boasts strong growth, economic output is still relatively weak. In contrast to the eight EU accession candidates from CEE, the problems that came in the wake of transformation to a market economy were not the only ones besetting the SEE economies: they were struggling with the added burden of ethnic conflict and war. In addition, the region's economies were hard hit by the split-up of the former Yugoslavia, combined with the collapse of the common economic zone and the disruption of trade flows. "Gross domestic product (GDP) per capita in SEE, averaging EUR 2,100, is just 35 per cent of the level registered in the EU accession candidates," said Ms Kager. In Croatia, per capita GDP is EUR 5,270, which is more than twice as high as Romania's, which ranks second on this list. The prosperity levels in SEE move within a fairly narrow band, ranging from EUR 1,300 per capita GDP for Serbia and Montenegro to EUR 2,100 for Romania.
As the political situation in SEE became increasingly stable, so did economic conditions. As a result, the region is now transforming from a laggard to the growth leader in CEE. A high stability of exchange rates and visibly reduced inflation rates provide an improved business environment for international investors. This improvement has been the result of a changed legal framework, increased legal security and an accelerated privatisation process. The inflow of foreign direct investment in SEE has reached EUR 3.5 - 4 billion annually. "Capital inflows will further rise in the years ahead as large-scale privatisations in the industrial and utilities sectors are still outstanding," remarked BA-CA's Chief Economist.
Along with the political and economic integration of the accession candidate countries in the new Europe, the strong economic dynamism in the region may be expected to continue in the medium term. It will further the process of approximation of the SEE economies to the prosperity levels of existing and new EU member states. "With average economic growth of 5 per cent the SEE region will be the growth market on the European continent," said Ms Kager.
An efficient banking sector is emerging
In the wake of the stabilisation of the overall economic conditions, the banking sector has been developing fast. Rigid measures of reform such as the restructuring and privatisation of a large number of state-owned banks and the close-down of insolvent institutions, a solution, consistently applied, to the problem of bad loans, and the introduction of up-to-date banking legislation and strict banking supervision regulations all have contributed to the emergence of an efficient banking sector. The entry of foreign banks, which even dominate the market in some countries, has played a vital role in building up trust among the population. Measured by total assets, a share of two thirds in the SEE banking market is held by foreign banks. With a share of more than 90 %, Croatia tops the list of countries in this regard.
With a population of 55 million South-East Europe represents a sizable market. Bank Austria Creditanstalt takes account of this potential in its business orientation. The bank is represented with a banking subsidiary each in Romania, Serbia and Montenegro, Slovenia and in Bosnia and Herzegovina. BA-CA's presence in the region was strongly expanded last year with the acquistion year of Splitska Banka in Croatia and Biochim in Bulgaria. In March 2003 a representative office in Macedonia was added to BA-CA's network. Bank Austria Creditanstalt is thus becoming a leading international bank in the region. "Considering the strong economic dynamism in the region, coupled with the backlog demand of the population for banking services, we should see rapid growth in the banking sector," said Marianne Kager.
Enquiries: Bank Austria Creditanstalt Group Public Relations
Walter Graßl, Tel. +43 (0)5 05 05 ext. 57126