Quo vadis CEE? Regional trends and prospects for the next decade
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Mai 2011 |
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CODRUŢ PASCU - Managing Partner
ROLAND BERGER STRATEGY CONSULTANTS S.R.L. |
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CODRUŢ PASCU
Managing Partner
ROLAND BERGER STRATEGY CONSULTANTS S.R.L.
WRONGLY LABELLED. This was the title of an article dealing with Eastern Europe, published at the beginning of last year by the Economist, whose main point was how increasingly hard it becomes to be talking "sensibly" of such a region, considering the broad discrepancies among the countries it presumably incorporates and how much this gaps have widened during the economic downturn.
The future of Central and Eastern Europe (CEE) as a (non)unitary economic and management region was also the topic of a recent study conducted by Roland Berger Strategy Consultants among senior managers in the region, whose purpose was to identify development prospects in Central and Eastern Europe for the next decade, from a management perspective.
Results were unambiguously clear. Top managers that responded to the survey seem to agree with the Economist point of view: CEE as a single management region will no longer exist in its current form. The region will become even more diverse and large corporations will increasingly start dividing it into sub-regions. Furthermore, three out of five managers surveyed agree that the trend toward differentiation is likely to intensify over the next decade.
Main reason behind this conclusion lies in the differing trajectories of economic development in the various countries. Whereas the Central European states are set to emerge as largely innovation-driven economies by 2020, the countries of Southern and Eastern Europe will still have to compete based on low input factors primarily. Thus, the region in its whole will no longer be among the global emerging markets but will remain the main European growth region, with GDP growth here expected to plateau at about 2% above the Western European (WE) level.
Although CEE countries continue to develop from “workbenches” to innovation-driven economies, the gap between WE and CEE will persist. This is largely due to the poor development level of infrastructure and institutions, which represents CEE‘s main weakness. Moreover, human capital issues (demographic development, brain drain, education) will remain a second bottleneck for further economic development, as globalization makes it so much easier for talents in the region to migrate elsewhere. On the other hand, its unique position as a bridgehead between the emerging markets of Russia, Turkey, China and the advanced economies of Western Europe is CEE‘s main future advantage.
CEE as a growth region
During the first decade of the new century, CEE has been one of the global growth regions. Growth however, driven in particular by Foreign Direct Investments (FDI) from WE, concealed unsolved structural problems, such as institutional weaknesses, inadequate infrastructure and lack of innovation. The absence of FDI during the crisis revealed these issues and structural limitations became obvious. What’s more, business leaders surveyed do not expect CEE to regain its status as a global growth engine, as the region is perceived to be stuck in the middle and forced to find new winning strategies.
When analyzing perceptions at a country level, Polish, Czech and Romanian managers are most optimistic about the upcoming decade. At the other end of the spectrum, Ukrainian, Austrian and Croatian managers expect only slow growth. Interestingly, the region has come out of the economic downturn quite negatively, with optimism declining compared to 2005/2006, when we conducted the same survey. Only Polish managers are more optimistic than four years ago, while Croatian ones have changed from being extremely optimistic to downright pessimistic. Romanian business leaders have also lost some of their buoyancy, but especially the size of the market partly compensates for some of the downsides.
As opposed to some other countries, Romanian optimism spreads both on the business volume, as well as on the number of workplaces. In fact, additional jobs are expected only for Ukraine, Romania and Poland, while managers based in Croatia and the Czech Republic are forecasting only a stagnant labor market and Austrian managers even fear a slight drop in employment opportunities in their country.
