Foto: Intellinews
"This study (Economic and Social Impacts of FDI in Central, East and Southeast Europe by Doris Hanzl-Weiss and Branimir Jovanović from The Vienna Institute for International Economic Studies) assesses the economic and social impacts of foreign direct investment (FDI) in
17 economies in Central, East and Southeast Europe (CESEE). More precisely, we
investigate how different FDI inflows have affected various economic and social
indicators, such as GDP growth, labour market outcomes, and poverty and
inequality, for the period since the fall of communism until 2020. (…)
During the
past three decades, the economies of Central, East and Southeast Europe (CESEE)
have been experiencing strong inflows of foreign direct investment (FDI).
Between 1993 and 2020 the world as a whole has been receiving FDI inflows of
around 2.5% of global GDP, while foreign investment in CESEE has averaged 4.4%
of GDP. Most of these inflows into CESEE – around 60% of the total – have been
coming from the nearby EU15 countries. Western European companies entered the
attractive CESEE economies to ensure their presence in the new fast-growing
markets, as well as to benefit from the lower production costs there. (…)
We find
that FDI inflows have had, in general, a positive effect on economic growth in
CESEE, and that this effect has been particularly strong for German and
Austrian FDI. For total FDI, higher inflows of 1 percentage point (pp) of GDP
are associated with 0.19 pp higher GDP growth. For FDI from Germany and
Austria, this effect is five times higher – FDI inflows of 1 pp of GDP have led
to 0.9 pp higher GDP growth. The positive GDP effects have come from the higher
consumption and exports that the FDI has induced. FDI inflows have also reduced
unemployment and increased wages, but have had no effects on labour
productivity. Total FDI has had only limited effects on inequality and poverty,
but FDI from Germany and Austria has been found to reduce both inequality and
poverty, likely because they have benefitted mainly lower-income persons. There
are differences in the effects of the different types of FDI, with reinvested
earnings and equity capital having in general more beneficial effects than
intra-company loans. Also, FDI in different sectors of the economy has had
different effects, with inflows to the secondary and tertiary sectors having
greater effects than inflows to the primary sector.
The policy implications of
these results are that CESEE economies should not give up on their efforts to
attract more FDI, but also that their endeavours should be more targeted,
focusing on investments that have greater economic and social impacts.
Moreover, foreign investment should not be criticised for the perhaps
unsatisfactory economic and social performances of the economies from this
region. Instead, the reasons for this should be sought in domestic factors and
in the modest growth of the European Union during the past two decades."
