Foreign direct investment (FDI) into the financial centres of central and eastern Europe (CEE) nearly halved over the 12 months to the end of January 2018, despite stronger economic growth coming out of the region.
The International Monetary Fund expects gross domestic product to have reached 2.4% in 2017, up from 1.7% a year earlier. CEE financial centres may need more than better economic conditions to attract foreign flows, however, as their main investors – western European financial firms – continue to operate in subdued economic environments at home.
Western spending
Out of the total investments into the region, about half were by western European investors. Indeed, three of the four projects into Prague – which leads the ranking with an estimated $117.3m – were from western Europe.
Second placed Warsaw, however, is an exception. Most investments into the Polish hub came from the US – most notably from JPMorgan. It is opening a shared services centre in the city for an estimated value of $25.9m, the largest inflow into Warsaw over that period.
In stark contrast to the sharp decline of inward FDI into CEE financial centres, outward flows have more than doubled over the same period. The overwhelming divergence is mostly explained by a single, large project out of Bulgarian capital Sofia. Without this deal, estimated to be worth $603.9m, outward flows would have been only marginally higher than in the previous period.
Interestingly, the investment was directed at another CEE hub. A subsidiary of Sofia-based Management Financial Group, a consumer loans provider, plans to open 15 new regional offices and a training centre in Romania. The vast majority of all recent outward financial services FDI also remained within CEE.
