In the 2000s, Eastern Europe was a successful region of Emerging Markets. A kind of gold rush attracted many investors to these markets. The region was hit hard by the financial crisis of 2008, but the investment story was not yet written off. It was only political changes, such as the Caucasus war of 2008, the annexation of Crimea in 2014 and, ultimately, the war in Ukraine in 2022, that made this region almost uninvestable for many investors.
Region falls from the radar of investors
While Central Europe as part of the EU remained investable, the investment region of Central and Eastern Europe (CEE) has been significantly reduced in size due to the loss of Russia. Valuations are down 30 to 40 per cent compared to ten years ago due to the risk associated with the war in Ukraine and the lack of liquidity. But high energy prices – which affect all of Europe – are also weighing on economic development and the region’s attractiveness. Whether the situation will improve in the near future depends on many factors, including the outcome of the war in Ukraine.
Global conflicts and their impact
Global conflicts, such as the trade dispute between the US and China, are also affecting the region. Even before Donald Trump took office as US president, there were discussions in Europe about moving the production of goods closer to their own markets again and not having everything manufactured in Asia, especially China. The Eastern European markets could benefit from a shift in production from Asia to Europe, as these countries produce more cheaply than Western Europe. However, the region is heavily dependent on the West, particularly Germany. If Germany’s economy falters, Eastern Europe will suffer too. Therefore, the actions of the new German government could potentially improve the economic situation again.
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