Central and Eastern Europe (CEE) is set to become the next “great place” to invest in as Western European businesses “seek new places to nearshore, offshore, or get access to growing consumer markets,” according to an update from iBanFirst.
iBanFirst, a global provider of foreign exchange and international payments for businesses, which has 13 operational offices in 10 European countries, of which 3 in CEE countries, has conducted “a study among business clients, based on which it has identified 5 compelling reasons for businesses to expand their operations in the region.”
Rapid Economic Growth: In the last years many CEE countries “have outpaced Western Europe in economic growth.”
The IMF forecast for the CEE GDP growth is “to grow twice as fast as the eurozone average between 2023-2026.”
For example, Romania has recorded “the highest rate of economic growth among EU member states approx. 800% over the last 20 years (2000-2022). The outlook for CEE economies remains positive, but the war in Ukraine, rising inflation, and a possible global economic slowdown could pose risks.”
iBanFirst, with a staff of only 25 professionals in the CEE, says it was “able to onboard >1,000 SME clients in Bucharest, Sofia, and Budapest in less than two years. iBanFirst has transacted over €2 billion in cross-border payments for Central and Eastern Europe (CEE) based companies within two years of entering the regional market.”
In the CEE region, it is possible to “build a sustainably profitable business from the ground up in less than 18 months, depending on the industry.
A Skilled and Affordable Labor Force: CEE has a workforce “that is young, educated, and highly skilled. This talent pool is available at a c30% lower cost compared to Western Europe (WE). Romania has the highest proportion of young people (aged 15-29) in the EU, with approx. 36%, closely followed by Bulgaria and Hungary.”
This is significantly higher than the EU “average of 23.7%.” This young and dynamic population is “a key driver of economic growth.”
Employment costs are lower “compared to WE, primarily related to a lower personal income tax rate, but the gap is shrinking.”
However, if you’re thinking about “investing in the CEE, don’t make lower labor cost your top reason. Employees who are properly trained, paid, and given promotion opportunities are harder working and more motivated than their counterparts in Western countries.”
Johan Gabriels, Regional Director for South-East Europe at iBanFirst, said:
`Our HR strategy was to invest in young people, offer them career opportunities and financial motivation. We promoted them early, trusted them, and they became top performers at European level. At iBanFirst, we choose to exclusively work with the best in-market employees, who have advanced through the ranks of our business. The average age is well under 30 years.”
Access to Expanding Consumer Markets: The CEE region’s combined population of “over 287 million people and “approximately 7 million SMEs[1] constitutes a sizable market with rising purchasing power.”
These economies’ middle classes “are growing, creating a demand for Western-branded goods and services.”
In iBanFirst’s opinion, being regionally “focused is a winning strategy. Large corporations are prone to regard parts of the CEE as tiny or non-core, whereas small local businesses or start-ups lack scale.”