The central and eastern Europe (CEE) region is expected to see the slowest growth among emerging markets in 2011, according to a report from accounting and consulting network Nexia International. However, incentive packages aimed at attracting foreign capital will remain intact and in some cases will be expanded.
After a turbulent 2009, which brought an increase in foreign debt and restricted access to lending, the pace of growth in 2010 was still not enough to realise the region’s full potential.
Hopes that 2011 would improve the situation in the region seem to be closer to wishful thinking than reality. With the exception of Russia, CEE countries are not likely to benefit from the commodities boom, while export levels may decrease as a result of the crisis in the eurozone.
Leaders and laggards
Growth in the CEE region is predicted to be about 3.7%. This figure contrasts starkly with conditions in areas such as Asia, sub-Saharan Africa and Latin America, which are expected to grow at rates of 7.5%, 6% and 4.5%, respectively, according to Nexia experts.
The report – Doing Business in Central and Eastern Europe – points out, however, that the crisis prompted reforms that can be seen as important steps towards regaining a favourable economic regime. Hungary and Romania, which were hit heavily by the economic downturn, carry on with extensive programmes aimed at increasing the level of competitiveness for investment in the region. Hungarian reform revolves around reductions in taxes on personal income and corporations, while Romania now offers an exemption from taxes on reinvestment profit.
The report points out that Russia is also introducing long-awaited changes, such as the establishment of a private equity fund to help regulate foreign investment in industrial projects, privatisation of state-owned banks and communication companies, and attempts to raise the level of services for international investors.
The report, which focuses on the Czech Republic, Hungary, Poland, Romania, Russia, Slovakia and Ukraine, states that investors eyeing the CEE region may still struggle with fast-changing legislation, erratic tax regulations and red tape. However, it also acknowledges the region’s potential and the measures that are being undertaken to increase its competitiveness, as it slowly but steadily gets back on its feet.