Linking countries
The CEE region will become more heterogeneous.
Central and Eastern Europe (CEE) will remain a growth region, but will grow at a slower pace in the future. The region will, however, need to realign itself to continue to be successful: The focus will shift away from today's most important industries, especially the chemical and automotive sectors as well as those depending on raw materials, while energy and IT are set to boom in the next ten years. Due to its geographic location, CEE could form a strong link between Western Europe and Russia. Another important asset is the region's cultural affinity with the West and its well-educated population. Excessive bureaucracy, corruption and poor infrastructure on the other hand, are problems that will not disappear in the medium term.
These are the findings of the study "CEE in 2020 – Trends and perspectives for the next decade". The study is based on a survey of some 320 managers in Central and Eastern Europe.
CEE as a single management region will no longer exist in this form. The reason is the individual countries' different trajectories of economic development: The Central European countries will emerge as largely innovation-driven economies by 2020, while the countries of Southern and Eastern Europe will still have to compete against the BRIC economies as production locations. The region will become more heterogeneous. This why companies have already begun to break CEE down into subregions. Three-fifths of the business leaders interviewed expect this trend to gain further momentum in the next decade.
These are the findings of the study "CEE in 2020 – Trends and perspectives for the next decade". The study is based on a survey of some 320 managers in Central and Eastern Europe.
CEE as a single management region will no longer exist in this form. The reason is the individual countries' different trajectories of economic development: The Central European countries will emerge as largely innovation-driven economies by 2020, while the countries of Southern and Eastern Europe will still have to compete against the BRIC economies as production locations. The region will become more heterogeneous. This why companies have already begun to break CEE down into subregions. Three-fifths of the business leaders interviewed expect this trend to gain further momentum in the next decade.
"CEE as a single management region will no longer exist in this form. ", Vladimir Preveden, Managing Partner.
Significant sales growth, but hardly any new jobs
Central and Eastern Europe as a whole will undergo significant change. During the economic crisis, CEE lost its position as an engine of global economic growth, and the decision makers interviewed do not expect the region to regain this position. In the years to come, CEE will have to firmly establish itself as a European growth region. Growth rates of about 2% above Western European levels are likely. The managers interviewed expect a significant increase in sales but remain rather cautious when it comes to estimating the number of jobs. New jobs are likely to be created in Ukraine, Romania and Poland, but employment levels will probably remain much the same in Croatia and the Czech Republic. Austrian managers even expect the number of jobs in their country to decline somewhat.
Geographic location and high level of education are important assets
CEE managers see the region's geographic location and cultural affinity to Western Europe as an important asset. Interestingly, managers in all CEE economies regard their country's geographic location as its most important asset. And, indeed, CEE can play an important role as a bridge linking Western Europe not only with Russia but also with Turkey and emerging markets in Asia. To achieve this, a special strategy is required. Especially Russia will have an important role to play in the next decade, particularly in the raw materials sectors.
Demographic development underestimated
Another asset is the good education system in CEE. But this legacy is threatened to erode: The latest OECD Programme for International Student Assessment (PISA) ranks CEE participants mid-field, but top university rankings are held by other countries. By and large, human resources might become a limiting factor in the next ten years. Population figures will decline in all CEE countries and the brain drain to Western Europe and North America will continue. But far too few managers and politicians find this fact alarming yet.
Employees will have to face decisive changes as well. It's no longer just technical qualifications that count, soft skills like foreign language skills, career development and complexity handling are increasingly in demand as well. Most companies are already using English as their corporate language, and Russian is becoming more important as well. German language proficiency will remain an asset in Central European countries. In future, companies will be looking more and more for employees with strong entrepreneurial and problem-solving skills.
Central and Eastern Europe as a whole will undergo significant change. During the economic crisis, CEE lost its position as an engine of global economic growth, and the decision makers interviewed do not expect the region to regain this position. In the years to come, CEE will have to firmly establish itself as a European growth region. Growth rates of about 2% above Western European levels are likely. The managers interviewed expect a significant increase in sales but remain rather cautious when it comes to estimating the number of jobs. New jobs are likely to be created in Ukraine, Romania and Poland, but employment levels will probably remain much the same in Croatia and the Czech Republic. Austrian managers even expect the number of jobs in their country to decline somewhat.
Geographic location and high level of education are important assets
CEE managers see the region's geographic location and cultural affinity to Western Europe as an important asset. Interestingly, managers in all CEE economies regard their country's geographic location as its most important asset. And, indeed, CEE can play an important role as a bridge linking Western Europe not only with Russia but also with Turkey and emerging markets in Asia. To achieve this, a special strategy is required. Especially Russia will have an important role to play in the next decade, particularly in the raw materials sectors.
Demographic development underestimated
Another asset is the good education system in CEE. But this legacy is threatened to erode: The latest OECD Programme for International Student Assessment (PISA) ranks CEE participants mid-field, but top university rankings are held by other countries. By and large, human resources might become a limiting factor in the next ten years. Population figures will decline in all CEE countries and the brain drain to Western Europe and North America will continue. But far too few managers and politicians find this fact alarming yet.
Employees will have to face decisive changes as well. It's no longer just technical qualifications that count, soft skills like foreign language skills, career development and complexity handling are increasingly in demand as well. Most companies are already using English as their corporate language, and Russian is becoming more important as well. German language proficiency will remain an asset in Central European countries. In future, companies will be looking more and more for employees with strong entrepreneurial and problem-solving skills.
CEE decision makers regard the energy sector as the most important growth industry.
Weak institutions and poor infrastructure
The business leaders expect excessive bureaucracy, corruption and poor legal and fiscal frameworks to remain the main disadvantages for CEE as an economic region. Although most economies have now become EU members, public institutions in all Central and Eastern European countries still have a lot of catching up to do.
Energy as a topic for the future
Scare resources and dependence on fossil fuels will be the central issue in the next decade. Second place is reorganizing public finance, followed by the impact of technological progress. Climate change is an issue only because CEE decision makers regard the energy sector as the most important growth industry. IT and telecoms as well as pharmaceuticals and healthcare are next. Energy-related topics (energy efficiency, renewable energies) and IT solutions are therefore seen as the key growth drivers. Services will boom especially in the region's more mature economies. Industries that depend heavily on raw materials, the chemicals industry and the automotive sector will lose some of their importance. But these are currently the most important industries in Central and Eastern Europe. They will be in urgent need of realignment in the years to come.
The business leaders expect excessive bureaucracy, corruption and poor legal and fiscal frameworks to remain the main disadvantages for CEE as an economic region. Although most economies have now become EU members, public institutions in all Central and Eastern European countries still have a lot of catching up to do.
Energy as a topic for the future
Scare resources and dependence on fossil fuels will be the central issue in the next decade. Second place is reorganizing public finance, followed by the impact of technological progress. Climate change is an issue only because CEE decision makers regard the energy sector as the most important growth industry. IT and telecoms as well as pharmaceuticals and healthcare are next. Energy-related topics (energy efficiency, renewable energies) and IT solutions are therefore seen as the key growth drivers. Services will boom especially in the region's more mature economies. Industries that depend heavily on raw materials, the chemicals industry and the automotive sector will lose some of their importance. But these are currently the most important industries in Central and Eastern Europe. They will be in urgent need of realignment in the years to come.
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