Foreign investment in EU transition economies ‘will decline’

A new report from the United Nations (UN) predicts that foreign direct investment (FDI) in Europe’s transition economies will fall by approximately 38% in 2020.

The report highlighted declines in nations in south-east Europe, as well as the Commonwealth of Independent States (CIS) and Georgia.

The findings show that the economies of these nations, already hit hard by the coronavirus crisis, are now being further blighted by a reduction in new construction projects.

According to the report, greenfield project announcements (a key indicator of investor interest), which were already in decline in 2019, have suffered a further 44% decline in the first quarter of 2020, compared with the same period last year.

For these in-transition economies, the reduction in investor interest in the first quarter of 2020 is in sharp contrast to that of 2019, when FDI increased by 59% to approximately €48.5 billion.

The bulk of the investment, however, was seen in projects in the Russian Federation, Ukraine and Uzbekistan; the rest of the region saw a slight (3%) decline.

Outward investment from transition economies is also set to fall, and this after a 37% decline in 2019. The UN report cited the coronavirus crisis and the subsequent low oil prices as downward drivers, saying these declines are unlikely to be reversed before 2022.

James Zhan, director of investment and enterprise at the United Nations Conference on Trade and Development, said, “The pandemic has provoked a recession in economies in transition that affects market-seeking FDI directly.”