Bank Austria Creditanstalt presents WIIW study: foreign direct investment in South-East Europe

  • Above-average economic growth in the region
  • Attractive market entry opportunities for foreign investors
  • Strong inflow of direct investment through further privatisation

Real economic growth achieved by South-East Europe (SEE) since 2001 has significantly exceeded the average rate of GDP growth in the five countries in Central and Eastern Europe (CEE). In 2003, economic growth in Poland, Slovenia, the Czech Republic, Hungary and Slovakia averaged just under 3 per cent. This compares with a growth rate of close to 4 per cent in South-East Europe (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, and Serbia and Montenegro), making the region of South-East Europe considerably more attractive to foreign investors. This is the result of a study commissioned by Bank Austria Creditanstalt.

An increase in the production of goods made only a small contribution to South-East Europe's strong economic growth. "The decisive factor is the stronger growth momentum in the service sector, especially trade, transport and telecommunications, and financial services,” says Marianne Kager, Bank Austria Creditanstalt's Chief Economist.

Countries in South-East Europe are still lagging far behind countries in CEE. Per-capita income, measured by GDP per capita, is just under 40 per cent of the average for the five CEE countries. "Many industrial companies are still using obsolete technologies, which limits their competitiveness in international markets,“ Marianne Kager adds.

Therefore high expectations are being attached to future inflows of foreign direct investment. Investors in South-East European countries have so far shown restraint, and the inflow of funds was spread unevenly. Croatia has benefited the most. "But given the rapidly progressing integration into EU structures, and based on the advantage in terms of lower production costs, Bulgaria and Romania will probably become increasingly attractive target countries for foreign investment," says Josef Poeschl of the Vienna Institute for International Economic Studies (WIIW), which prepared the study on direct investment in South-East Europe on behalf of Bank Austria Creditanstalt.

At present, most of the foreign investors in SEE are banks, telecom companies, major retail chains, and companies making beverages, tobacco products and cement. The privatisation process, which has not yet been completed, could give an additional boost to investment. "This provides good opportunities for acquiring businesses at attractive prices and benefiting from the advantages of an early market entry," Josef Poeschl adds.

 Selected indicators (pdf, 28 KB)

 Xplizit: "South-East Europe – A Region in Competition for FDI"

Enquiries: Bank Austria Creditanstalt Group Public Relations
Edith Holzer, tel. +43 (0)5 05 05-57126 ; e-mail: edith.holzer@ba-ca.com