Erste: Limited impact from Brexit expected on Southeast European economies

Erste Group analysts have projected that Brexit will have an impact on Southeast European economies although to a limited degree. It is still uncertain whether the programmes that the UK was funding will be continued or whether they will be picked up by other net contributors like Germany or France.

Croatia and Romania are all assigned to receive around or above 20% of their last year’s GDP in total for the seven years in the period 2014-20. Croatia’s government and analysts expect a gradual acceleration of inflows and stronger contribution of EU projects to the investment cycle ahead, considering that the country didn’t receive much given its accession in 2013.

Erste expects that the gap of financing public projects be covered, at least in part, by private sector, public-private partnerships or stronger bank lending to the corporate sector.

As a candidate country, Serbia would not be strongly affected by the UK’s decision to leave the EU. This is because pre-accession funds wouldn’t be hit hard by Brexit and the impact on trade connections will be limited.

Erste analysts say Slovenia, in turn, is one of the best performers regarding its EU fund absorption rate and investment prospects in this country are heavily dependent on these funds, as seen last year, when Slovenia recorded a slowdown and weakening on the investment side before the adoption of the new EU budgetary framework. That said, a reduction of the EU fund potential could bring more uncertainties regarding Slovenia’s investment outlook. However, Erste analysts do not expect that Brexit will heavily reduce the availability of EU funds in the short run, so there will be no major risks to the baseline forecasts in the medium term.