Investing in Central Europe

Insights

Investing in Central Europe

Your move in the right direction

The key drivers for investors making cross-border direct investments are usually either to gain access to new and growing markets, or to reduce costs. The countries of Central Europe score highly on both. This publication offers a useful guide for potential investors with Central Europe on their radar.

Why invest in Central Europe?

The CEE region within the EU offers relatively low labour costs, a favourable tax environment, and availability of tax incentives and since spring 2013 solid GDP growth trends across most of the economic sectors. Over the last 10 years the CEE markets replaced the southern European ones such as Spain, Portugal, and Greece as the location for cheap labor. However, the appeal of the markets is based more than on just cheap wages. There is some considerable growth divergence in recent years and also currently as the southern “peripheral” EU markets struggle economically while the core CEE ones are relatively booming. Investors also get good value for money in labor costs as most foreign companies agree that the overall quality of CEE staff is relatively good when compared with other European and emerging market economies.

As wages continue to rise and accelerate in China and some other emerging markets, the skill set, proximity and “cultural closeness” and language skills all add to the appeal of the CEE region.

 

Some interesting facts about Central Europe

  • The core CEE region is booming relatively and core CEE grew at 8 times the GDP of Latin America in 2015 and in 2016!
  • Poland is one of the best performing transition markets in the world.
  • Consumer confidence in Hungary and the Czech Republic during 2014-15 saw some of the best improvements in the world and in Europe.
  • When the Eurozone grows by an extra 1%, then the CEE region grows by an extra 1.3%.
  • South-eastern Europe (SEE), with the exception of Romania, was not performing as well due to structural economic issues such as budget deficits, debt levels and poor allocation of funding, with Serbia pressing for austerity measures against a soft growth back-drop.
  • The SEE markets were about “9-18 months behind” the core CEE ones, but by mid-2016, the SEE markets have embraced that catch-up with GDP growth levels at close to 3%.

Deloitte Central Europe 2016