Page 4 - bne Magazine August 2022

4 I Companies & Markets bne August 2022
Poland’s central bank is expected to keep raising interest rates to 7% or even 8% but there are analysts who predict that the NBP will only stop at 10%
FDI in CEE: It’s about Russia, inflation and populism
Wojciech Kosc in Warsaw
After February 24, when the first Russian tanks rolled into Ukraine, looking at a map of Europe is no longer what it used to be.
The ludicrously obvious fact that several Central and Eastern European countries border with, or lie close to, Russia and Ukraine could have a detrimental effect on their attractiveness to FDI projects in the short run, the recent “Attractiveness Survey Europe 2022” report by consultancy EY argued.
On the other hand, as businesses and investors flee Russia, those same countries could benefit, longer term, from the same geographical position (as it won’t be all that expensive to relocate a business or a planned investment project from Russia to, say, Poland) as well as from the extra layer of credibility and safety of EU and Nato membership.
Otherwise, the same factors have long reigned supreme in CEE when it comes to defining the region's allure to FDI projects.
“The region is cost-competitive compared with Western Europe
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and benefits from the presence of skilled labour, IP protection and – in some cases – EU membership,” Marek Rozkrut, EU and CESA chief economist at EY, said in a note on the report.
Even with its position shakier now than before the war, the CEE region was still the third most attractive region for FDI in the EY survey this year. Of 501 respondents, 42% pointed to the region, which trailed only Northern America (52% of indications) and Western Europe (60%).
Mainland China and India came fourth and fifth with, respectively, 29% and 24% of indications.
Populists and inflation
Not that there are no risks. According to the EY survey, the main risk of investing in Europe is the “rise in populist/ protectionist feelings among politicians and populations”.
That sounds familiar to anyone who has been following the news out of the region, where Poland and Hungary now have a track record of several years of eroding rule of law (that is