Trade and foreign investment remain essential to ensure lasting growth in developing countries.
Private sector enterprises areplayinga significant role in enabling economic growth.
Since the emergence of globalization, trade, andForeign Direct Investment (FDI) have had a huge impact in lifting millions of people out of poverty.
According to the 2019 Global Risks Report, published in the World Economic Forum, trade relation, as well as investments, have, however, been shaking recently.
The United States on one side has imposed “global safeguard tariffs” on Chinese imports as well as on its long-standing allies, the EU, Canada, Mexico, and others. Nevertheless, the European Commission shortly after insinuated that countermeasures would be taken totaling US$294 billion, around one-fifth of total goods exports. Yet, trade is not the only economic mechanism which has seen unexpected volatility in recent years. Countries that previously used to be very open to foreign direct investment, now have put in place restrictive mechanisms for inward investments. Countries like Germany, France, and the United Kingdom, have all established draft proposals to which limit or block the foreign acquisitions. While these tensions have significantly intensified, the International Monetary Fund (IMF) has redrafted its projections for growth pertaining to the year 2018 and 2019. According to IMF, they expect the United States growth to drop from 2.9% last year to 2.4% in 2019, and in China from 6.6% to 6.2%. The overall outcome of this stagnating growth will mostly affect the developing countries who according to the 2019 Global Risk Report, are already facing rising interest rates and domestic political disruptions.
For South East European (SEE) countries, Foreign Direct Investment inflows have, for several years, been considered as a powerful tool for supporting economic growth. These investments have created the infrastructure for generating sustainable economic growth which has triggered significant growth in productivity (mainly from capital investments), created more jobs and played a key role in transferred technology and innovation.
Even though compared to other developed European Countries, growth is relatively slower and lower in South East European countries, yet again it is showing signs of improvement as compared to previous years. For Eastern European countries, FDI has played a principal role in promoting growth as a means of exports. Nonetheless, drawing a comparison between Eastern European countries and Western Balkans, we see that in Western Balkans the sectoral distribution in FDI has played a role in the decline of manufacturing, meaning that foreign investments were mainly focused on non-tradable services such as banking, telecommunication, real estate, etc. Considering the available infrastructure, and the continuous government activities for investments promotion, the Western Balkan countries are highly focused onattracting foreign investments and strongly rely on their capabilities and activities for restricting their respective economies.