Central Europe is not emerging anymore, giving investors solid growth potential
Opinion 2 minute read

Central Europe is not emerging anymore, giving investors solid growth potential

16 June 2014

Once home to the rising stars of the continent, Central Europe (CE) no longer has the excitement of the emerging economy and has yet to reach developed status – but there are still plenty of reasons to invest, says our regional expert.

As the European Union began to open up towards the east, there were a handful of countries igniting investor sentiment: Czech Republic, Hungary, Poland and Slovakia were emerging economies, full of potential.

Fast track to now and there younger models are taking the “emerging” place - such as Romania and Bulgaria - yet CE hasn’t reached the economic maturity of western counterparts. South East Europe has good potential for new investments, but Central Europe is a more mature market that still offers stable growth within the economically-difficult European Union.

It’s been challenging five years for Europe. Core CE and south-eastern Europe was badly hit by the global financial crisis, and business confidence has been low for several years in most of the region – Poland, of course, being the ever-strong exception.

While recovery is mild and still fragile, CEE does generally far better than its western neighbours. As CEEMEA Business Group estimates, when the Eurozone economy grows 1%, CEE automatically grows by 1.3%. When you also consider that the region has a smart and hardworking labour force and tight political and economic connections with the continent’s big players, the continued attraction of CE becomes clear.

The region will remain a more mature single-digit sales market for most companies, says CEEMEA Business Group, but that does not mean it should be discounted. Adding Czech Republic, Slovakia and Hungary to the Polish powerhouse and you’ve got a “decent sized cluster” in which to do business. In fact, CEEMEA reports that more companies than ever are reporting a mild and/or steady uptake in business in CE.

To whet the appetite: consumer confidence in Hungary in the last 12 months has improved at the fastest rate of any European country; Czech industry grew from -4.2% at the start of 2013 to 6.4% just 12 months later; and retail sales in Poland are now +5% compared with flat trends last summer.

The economic outlook in Central Europe is the best in half a decade, and macroeconomic figures are translating into a better business mood. The region still has lower wage costs, a well-trained labour force, healthier banking sector and less public and private debt than much of Western Europe – as well as a more mature legal and political system than a decade ago. Investors may have their heads turned by newer countries to the south, but don’t rule out Central Europe just yet – there’s plenty of life in her.

Later today Juraj Gerzeni and Hugh Owen from Allen & Overy will be speaking about Doing Business in Central Europe: Poland, Czech Republic, Slovakia, Hungary.

Written by

Juraj Gerženi

Managing Director

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