Bulgaria may see a 2010 foreign direct investments decline similar to the one it registered in 2009, according to a forecast of the Vienna Institute for International Economic Studies.

The combined FDI in 20 Central, East and Southeast European countries fell to EUR 58.5 B in 2009, down from EUR 111.5 B in 2008, said the Vienna-based Institute (WIIW) in a statement Tuesday.

It does forecast the region’s combined FDI to rise to EUR 66.6 B in 2010; however, it is not certain that Bulgaria will be among the beneficiaries of this modest increase.

WIIW points out that in 2009 the FDI inflow declined the most in the ten new EU member states (NMS) that it surveys compared to the countries in Southeast Europe (i.e. the Western Balkans), and the four CIS states Russia, Ukraine, Belarus, and Moldova. However, this is largely due to the fact that the NMS had registered a greater growth of foreign investments in the last few years.

Thus, in 2009, as a result of the global economic crisis, FDI in the new EU states dropped down to the 2003 levels, while the other two regions saw theirs collapse to the 2005 levels. Slovakia and Slovenia registered negative FDI inflows, while Poland and Estonia performed suffered least of all, shows the WIIW data.

The Vienna Institute points to positive equity investments in the CEEC.

“Continuous high equity inflows of EUR 2 billion or more to Bulgaria, Hungary, Poland and Romania prove that these countries maintained their attractiveness for new investments. In most NMS reinvested earnings fell strongly as investors’ incomes declined,“ reads the analysis.

The WIIW stresses one positive effect of the economic crisis on Bulgaria with respect to its current account deficit.

It says that in 2009, the current account turned positive in four NMS and ran significantly smaller deficits in the others.

“This was particularly advantageous for countries where the current account was in deficit and external financing constrained such as in Bulgaria and Romania. In six out of ten NMS more FDI-related income is taken out of the country than the amount of new FDI inflow. Still, the negative effects of the repatriation of FDI-related income can be balanced by other positions in the balance of payments. A positive foreign trade balance became the rule under the pressure of the crisis,“ conclude the Vienna analysts.

Based on global trends and the first quarter of 2010, the WIIW forecasts “FDI inflows to modestly increase in the region as a whole“. Poland and Russia together with as the Czech Republic, Hungary, Slovakia and Ukraine are expected to contribute to the revival of FDI in the region.

However, Bulgaria and Romania among the NMS and the Western Balkans states might receive smaller FDI inflows, says the WIIW.

According to its data, in 2009 Bulgaria’s FDI dropped by more than 50% - EUR 3.2 B compared to EUR 6.7 B in 2008, and will drop another 50% in 2010 year-on-year down to about EUR 1.5 B.

More information about the WIIW forecast on Eastern Europe is available on its website HERE