Eastern Europe: Investment Opportunities Survive Bad Economy

The economy remains difficult throughout Eastern Europe.  Although the Eurozone no longer seems quite so close to collapse, Europe has reentered recession with a “double dip.”  The West is not going to drive growth in the East.

Nevertheless, there is good economic news in the region.  While the Czech, Hungarian, and Romanian economies continue to contract, Bulgaria, Estonia, Latvia, Lithuania, Poland, and Slovakia enjoy expanding economies.  Observed the Wall Street Journal:  “It is notable that Estonia, Latvia and Lithuania have all largely completed extremely tough austerity programs and saw growth pick up in the third quarter.”

The bicycle manufacturer Dahon Europe is expanding sales in Eastern Europe. CEO David Hon explained: “Having moved all production for Europe to Bulgaria recently, it only makes sense to increase our sales and marketing focus in the area.  He added:  “Adding an experienced sales manager for the territory is absolutely necessary in order to properly maintain and grow the markets in Eastern Europe.”

Luxury car sales are increasing, up five percent since the beginning of the year.  Explained Anrea Castronovo of BMW Group Central Eastern Europe:  “Despite all troubles, part of the population still earns well and is solvent and this success is expressed in a luxurious car.”

Retail construction is rising, with Moscow the leader, Kyiv second, and Sofia third among 13 major cities in the East.  The supply of retail space in Eastern Europe has nearly tripled between 2009 and 2012.

Corporate travel is increasing in Eastern Europe.  Franzisjus Bumm of FCm Travel Solutions also pointed to Central Asia:  “Uzbekistan and Kazakhstan’s supply of natural resources make these countries highly attractive to Western economies.  The market in each of these countries is growing quickly, which is why the demand for corporate travel services is also rising.”  Moreover, “Georgia, which is on the crossroads of Western Asia and Eastern Europe is also a rising new business hub for corporations.”

In November, Air France announced a partnership with Air Berlin to expand operations in Eastern Europe.  Qatar Airways inaugurated service to Belgrade in November and to Warsaw in December.  Last year the airline added flights to Bucharest, Budapest, and Sofia.

Flydubai continues to expand in the region.  A discount airline begun three years ago, Flydubai has the most extensive Middle Eastern routes to Eastern Europe, serving Bishkek, Belgrade, Donetsk, Kharkiv, Skopje, and Tbilisi.  The number of annual flights was up 45 percent September to September.   The number of monthly flights was up 109 percent.

Long distance flights might become more important as foreign trading opportunities increase.  For instance, Taiwan Today commented on a Taiwanese “trade promotion delegation to the Balkans and Eastern Europe” representing 46 companies which generated $40 million in sales.  The objective was to help “Taiwan firms tap into emerging economies at a time when Europe and the U.S. are struggling with recession, and growth in mainland China seems to be stalling.”  Central and Eastern Europe will benefit in turn.

New business has enabled One Hour Translation to increase operations in Eastern Europe.  The company offers the world’s largest online translation service and employs 15,000 translators worldwide.  “We have seen a substantial growth in the Eastern European market recently” said CEO Ofer Shoshan.  The company plans on expanding its office next year in Kiev, where “we already established local partnerships with various business and service providers.”

Edward Lucas of the Center for European Policy Analysis observed:  “If the Euro-zone was growing, it would be easy to argue that all these countries’ long-term prospects are still bright.  They still have big cost advantages over the rest of Europe:  wages are around half the Western level.  They still have huge room for improvement in infrastructure and productivity.  Their membership in the EU (existing or impending) reassures investors and keeps borrowing costs down.”

However, Lucas warned that “Europe may be stuck with low or no growth for a decade.”  If so, Central and Eastern Europe will have to look for growth internally and elsewhere in the world.  That will put a premium on continued economic reform.

With Europe in recession, the East will face continued tough times.  However, even today some countries and some companies are doing well.  With the right policies, the region can prosper in spite of the West’s difficulties.

Image Copyright Shutterstock.com/Tomas Sereda