The outlook for Central and Eastern Europe is getting gloomier by the day as the eurozone crisis is weakening regional economies.
While there is a significant level of volatility and uncertainty around the eurozone’s performance in 2012, there are several clear trends that will impact MNC performance in CEE this year:
- 2012 GDP growth projections are low across the region and will be revised further down
- Decreasing exports will hurt local producers
- Tight lending will limit local companies’ ability to make investments and will dampen consumer demand
- Austerity measures across the region will slow government and consumer spending but will ease inflation
- Local currencies will remain volatile and weak against the dollar
MNCs should plan to adapt their product portfolios, purchasing policies, and partner relationships to respond to weaker demand and tighter lending conditions in CEE.
However, not all CEE markets will fare the same – some will be impacted more than others (see table).
This creates opportunities for MNCs that pay attention to the nuances of the different regional economies and zero in on the markets that will outperform the rest of the region.
The two most obvious ones are Poland and Turkey. In Poland, resilient domestic demand will sustain growth despite the negative impact of slowing export demand.
Turkey will definitely see a slowdown this year, but its macroeconomic fundamentals remain solid and the country offers excellent opportunities for long-term growth.
Both countries are presently experiencing currency depreciation, creating opportunities for cheap investment and acquisition of attractive local assets at a discount.