Fastest growing region of the EU

"What is really quite striking is that the CEE area is definitely the fastest growing in the EU," opens Tauber, in the first of four key highlights from his presentation.  

In 2015, GDP growth in CEE was approximately double that of the Euro area at 3.2% with similar rates expected in the near term outlook. 

Unemployment rates will fall to their lowest levels in recent years in contrast to those recorded in the Euro area which are forecast to remain above or around 10%. 

The main driver of growth is domestic demand with household spending supported by lower energy prices. 

Dispute strong growth dynamics, structural issues of CEE economics prevail

"Growth based on cheap labor and cheap materials is approaching or reaching its limits," says Tauber, accepting that it will be a challenge for local economies to make improvements in labor productivity which remains below the EU average.

The prevalence of the manufacturing sector, especially in the automotive sector, represent a structural issue for the region's economy. 

CEE increasingly dependent on foreign demand 

With around a quarter of exports from the CEE going to Germany, Tauber notes the risk of economic dependence with the EU. 

Whilst an average of 44% of exports from EU members go to other states within the bloc, 80% of all CEE exports are to EU countries. 

Redirecting trade to outside of the EU-area, particularly Germany, will need to play a part in making CEE economies more independent. 

"Strong integration in the European and global production chains is expected to support the CEE growth outlook in the future, with high exposure to both positive and negative shocks from its main trading partners," concludes Tauber. 

Germany not Brexit the main risk

Tauber plays down the effect of the UK's decision to leave the EU as an indirect risk to the region's economic growth but it raises concerns about the impact of non-economic factors on growth.  

Instead, he believes the main risk to the CEE growth outlook remains economic fortunes in Germany, given its strong trade linkages with local economies. 

"The idea of globalisation, national sovereignty and the nation-state is even more urgent and present with us now," says Tauber "I believe Brexit is an extremely threatening and negative development for Europe and for private equity." 

For a more in depth analysis of the trends and Developments, watch the full presentation below.

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Central & Eastern EuropeMacro Views

 13th October 2016 UTC

CEE: Macroeconomic Trends & Developments

Jan Tauber, Managing Partner at Genesis Capital delivers his keynote presentation at CEE M&A and Private Equity Forum 2016

All data and comments in this article are provided by Genesis Capital

Jennifer Ghoni Speakers Acuris

Jennifer is responsible for speakers and event programmes at Acuris. She leads content for Unquote's European private equity conferences and Mergermarket's M&A events in Eastern Europe, Nordics, Spain, UK, Ireland, Benelux and Switzerland.