Directional Economics CEEMEA: New horizons, from investment hosts to global investors
The desk views the Central and Eastern European (CEE) region as navigating a challenging energy landscape while seeking resilience through Outward Direct Investment (ODI). This strategy aims to transition from a reliance on foreign direct investment to developing successful multinationals. Per the full note from ing-think, while countries like the Czech Republic lead in ODI momentum, Poland and Romania show potential growth opportunities. With no major calendar events impacting these dynamics, the focus will stay on corporate strategies and growth trajectories in the CEE4 nations going into 2027.
What the desk is arguing
The CEE region is responding to recent energy shocks with resilience rooted in expanding its ODI, as highlighted in recent commentary from ing-think. This shift aims to create a robust framework encouraging local firms to pursue foreign expansion, which is increasingly seen as essential for enhancing market reach and profitability.
Evidence for this evolution is palpable; firms in Poland view international growth as necessary to escape the constraints of their relatively small domestic markets. The report notes that efforts to stimulate ODI are vital for economic development, given that current levels fall short of those expected for their economic stage.
Where it sits in our coverage
Our current consensus target for the EUR/PLN is set at 1.075, reflecting a range between 1.04 and 1.12. Notable per-firm targets include: - jpmorgan: 1.10 by Mar26 - bofa: 1.04 by Mar26
This desk's outlook aligns with jpmorgan at the upper end of our range, emphasizing a bullish sentiment towards Polish economic growth amid rising ODI activities.
How other firms see it
Firms like jpmorgan remain aligned with this strategy, reinforcing the notion of optimism around the CEE’s growth trajectory. However, bofa presents a contrarian view, forecasting more cautious performance for Poland and the CEE region.
In parallel, we should watch the EUR/USD currency pair, as it is likely to be influenced by these regional dynamics and the broader economic environment driven by European Central Bank policies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01CEE nations are pivoting towards ODI to build resilient multinationals.
- 02Poland shows particular potential for growth, though it lags behind the Czech Republic.
- 03Firms recognize the need for foreign expansion to diversify and innovate.
- 04The outlook remains positive towards 2027, particularly for Poland despite fiscal challenges.
Market implications
Traders should monitor the developments in ODI within the CEE region as significant corporate decisions are made, impacting the EUR/PLN pair levels, particularly if new investments are announced. Watch for fluctuating responses around 1.075, which could serve as a crucial pivot level.
Risks to this view
A reversal of this positive outlook could occur if energy prices sustain another sharp increase or if geopolitical tensions escalate further, undermining the region's economic stability and investor confidence in the multinationals.
Reports Report Directional Economics CEEMEA: New horizons, from investment hosts to global investors Published 13:25 The CEE region has been hit hard by a further energy shock. Yet despite the challenging macroeconomic environment, much of the region has shown greater resilience than expected Chris Turner Download PDF Executive summary Our main article in this publication argues that the next stage of that resilience will depend increasingly on Outward Direct Investment (ODI), as CEE economies seek to evolve beyond a low-cost, FDI-to-export, strong SME-based model of growth. Looking at the CEE4, we discuss why the next leg of the region’s growth journey will involve developing successful multinationals.
Countries could do more in this regard as their ODI remains well below the levels implied by their stage of economic development. So far, policymakers have focused primarily on attracting FDI and promoting exports. Going forward, they need to broaden this institutional framework to facilitate the foreign expansion of domestic firms, for example through market intelligence, access to financing and risk-sharing instruments, legal and regulatory support, and economic diplomacy.
Ultimately, firms themselves need to recognise the opportunities offered by becoming multinational. This is certainly the message we are hearing from our own corporate surveys, for example in Poland, where foreign expansion is now seen as a necessity to break out of relatively small domestic markets to diversify customer bases, spread fixed costs over greater sales and increase the returns on investment in innovation and digitalisation. The Czech Republic seems to have made the most progress with ODI, while Poland and Romania lag.
All countries could do more. Coming back to the immediate outlook for the region, we see a mixed picture heading into 2027. Poland is expected to remain one of the fastest growing economies in the EU, albeit with fiscal frailty.
Parliamentary elections next year mean there will be little appetite for fiscal consolidation, and the focus will remain on the sovereign bond market, where downgrade risks remain and foreign holdings are low. Even though we expect 50bp of rate hikes locally, we see the zloty staying relatively soft. Hungary should enjoy an improving growth rate and a better fiscal position.
The path towards euro adoption, which we see happening in 2032 at the earliest, would require a lower inflation target and a credible medium-term fiscal framework. These policy shifts could create room for 125bp of rate cuts by the end of 2027. Positioning on this theme is already crowded, but local currency bond yields should soften further and EUR/HUF should stay near 350/360.
Czech activity is set to slow next year on the back of softer real wage growth, but the manufacturing sector has been holding up reasonably well. We see the Czech National Bank as one of the most hawkish in the region, having already hiked this year. At least another 25bp of tightening by year-end should see ongoing demand for the koruna.
In Romania, the bond market continues to teeter on the edge of junk status. If a stable government can be formed, further fiscal improvement can win through and be rewarded with lower funding costs. This could end three years of stagnation.
In Turkey, we are more bullish on disinflation prospects than market pricing implies. We see 700bp of policy easing by end 2027. However, early 2028 elections will soon come into play.
Also covered in this publication, Croatia remains in good shape, politics remains challenging in Serbia, while Bulgaria is on the right path, albeit with imbalances. Ukraine continues to suffer from the destruction and macro imbalances of a protracted war. In the CIS, we see Uzbekistan as the outperformer given its strong and diversified growth, positive sovereign ratings momentum, and expected catch-up on gold exports.
In short, 2027 should be a year of idiosyncratic CEE stories. We are sure that the insights provided by our local economists and strategists make Directional Economics an essential guide to the region. Chris Turner, Global Head of Markets and Regional Head of Research, UK & CEE Directional Economics Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download
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