Today a presentation was given in London at the EBRD Annual Meeting by Debora Revoltella, Head of Strategic Analysis for CEE at UniCredit Group, on the following topic: "CEE: can the past success factors be the future success drivers?" The text below is an abstract of the presentation.
The CEE region has got the tools to rebound
• After 20 years of transformations, Central and Eastern European countries have successfully integrated the world economy
• To overcome the current crisis, the region has to maintain and further develop its structural links with the EU and the rest of the world
Over the last 20 years the development of the economy in Central and Eastern European countries (CEE) has been a great success story. The region underwent a clear transition process, resulting in almost a tripling of per capita GDP. A key driver for this success story has been the deep integration of CEE in the global context. "Today, CEE countries are open economies, with a total trade weighting for 70% of their GDP. The hard-won competitiveness of the region and its ability to preserve its production capacity are the key factors that will enable the CEE region to overcome the global crisis and to catch the recovery at first sight once the world demand will re-start", says Debora Revoltella, Head of Strategic Analysis for CEE of UniCredit Group.
Especially successful has been the trade integration with the European Union. "In a numbers of sectors, like machinery, electrical and optical equipment, automotive and transport, textile and rubber, CEE countries have become the production arm of the EU", says Revoltella. This guarantees a good future perspective, as most of these sectors, in which the region has specialised, are generally considered to be the most successful at world level. Foreign direct investments played a key role in building the new production capacity of the region and the success of the process has also contributed to the creation of a sizeable domestic market, which is today even larger than the markets of China or Germany.
The competitiveness of CEE is not only a matter of cost of labour. The quality of workforce, high productivity, quality and flexibility of the operating environment as well as legal and regulatory convergences towards the EU have all contributed to it. "The success of CEE has also reverted into a success factor for those countries, which had been "betting" on the region, like Austria, Finland, Germany, Italy and Sweden", says Revoltella. "Western companies have benefited from the CEE as a market for destination of their production as well as an area for delocalisation of production. It is not by chance that those sectors, which are more integrated (1) within CEE are also those which experienced a stronger growth in Western Europe. Producing in CEE is now an essential part of firms' strategy ".
The global financial crisis had of course its impact on the economies worldwide. The WTO and IMF predict a drop of the world demand by around 10 % or even more in 2009. For CEE, the analysts of UniCredit Group forecast a drop of exports by 65 bn euro in 2009 versus 2008 - the first in a decade, furthermore negative investments growth by around 10 %, a substantial drop in FDI (almost halved compared to 2008) and unemployment rising at a high level.
However, international commitment to support the region is high. Both national and international players go ahead with initiatives and here especially banks play an important role. "Being long term investors in the region, banks like the UniCredit Group can support the local economies in difficult times and prepare for a future rebound. Over the past 20 years of transformation, the region has acquired the skills and the tools that make foreign investments in those countries still the right choice", says Revoltella.
London, 15 May 2009
1) In terms of trade integration and FDI
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