Key Findings:
- Business Development Focus: 77% of Central and Eastern European (CEE) companies are investing in business development.
- Innovation Leadership: 27% of CEE companies are investing in product and service innovation, higher than the EU average of 24%.
- Investment Barriers: The primary barriers to investment are the uncertain macroeconomic situation (87%), rising energy costs (87%), and a shortage of skilled labor (82%).
The European Investment Bank (EIB) has released its latest survey on investment levels among CEE companies, detailed in the report "Business Model Update: Are CEE Companies Investing Enough?". This analysis, part of the Warsaw School of Economics (SGH) Report, will be presented at the Economic Forum in Karpacz from September 5 to 7, 2023. The findings highlight a recovery in investment activity following disruptions from the COVID-19 pandemic and the war in Ukraine. Companies are shifting from a capital-intensive growth model to exploring opportunities in modern technologies and innovation. Investment levels in CEE enterprises (77%) are nearly on par with the EU (80%) and the US (81%).
Driving Innovation and Competitiveness
EIB Vice-President Teresa Czerwińska noted, “Investment by CEE enterprises in product and service innovation surpasses the EU average, which will accelerate regional development, create jobs, and boost international competitiveness.”
EIB Chief Economist Debora Revoltella added, “Post-pandemic and war, CEE enterprises are focusing on replacing and expanding production capacity to enhance efficiency and environmental sustainability.”
Investment Priorities
CEE companies prioritize capacity replacement (46%) similarly to the EU average, followed by capacity expansion (25%) and innovation (17%). Manufacturing firms (20%) and large organizations (18%) invest more heavily in innovation. Countries like Poland (22%), Slovenia (19%), and the Czech Republic (17%) lead in allocating funds for new product and service development.
Allocation of Investment:
- Machinery and Equipment: CEE companies invest a larger share in machinery and equipment (53%) compared to the EU (49%) and the US (47%).
- Intangible Assets: Investment in intangible assets is lower in CEE (24%) than in the EU (37%) and the US (33%).
- Digital Technologies: Service companies in CEE invest more in digital technologies (18%).
Long-Term Barriers and Climate Change Impact
The main long-term barriers to investment are future uncertainty (87%), energy costs (87%), and skilled labor shortages (82%). Climate change also poses significant challenges. Companies face high costs for transitioning to zero-carbon methods, with more seeing it as a threat (36%) than an opportunity (18%). This contrasts with the EU, where these views are more balanced (32% threat vs. 29% opportunity).
Environmental Initiatives
Nearly 90% of CEE companies are committed to reducing greenhouse gas emissions, aligning with the EU average. Key initiatives include waste reduction (67%) and energy efficiency (55%). Investments in sustainable transport are less common (43% vs. 32% in the EU). Romania (93%) and Poland (90%) are leaders in undertaking environmental projects.
Financing Investment
In 2022, CEE companies primarily used own funds (70%) for investment, followed by external sources (25%) and group financing (4%). The highest use of external financing was in Romania (32%) and the lowest in the Czech Republic (18%). Of those using external financing, 75% obtained bank loans, with preferential terms more common in Hungary (39%) and the Czech Republic (36%).
About the EIB Group Investment Survey
The EIB Group Investment Survey provides a comprehensive overview of investment trends and financing in the EU. It includes responses from around 12,500 companies and examines corporate investment, investment financing, and municipal investment.
The EIB Group, owned by EU Member States, supports investments aligned with EU policy goals, including social and territorial cohesion and climate neutrality. The EIB is committed to phasing out fossil fuel-related projects and supporting €1 trillion in climate investments by the end of the decade. In 2022, over half of EIB Group loans supported climate and environmental sustainability projects, with significant investments in cohesion regions to promote equitable growth.
