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INVESTMENT ISSUES IN SOUTH-EASTERN EUROPE

Christopher Hurst () and Kristian Uppenberg
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Christopher Hurst: European Investment Bank, Projects Directorate

No 2000/2, Economic and Financial Reports from European Investment Bank, Economics Department

Abstract: The paper is organised as follows: The first section reviews the recent trends in investment rates in South-Eastern Europe (SEE). The low level of investment in the region emerges clearly from this discussion. To explain the low investment rates, we then look at the other side of the savings-investment identity. In particular, we split savings into a foreign component, a government component, and a domestic private sector component. The key weakness is the poor private sector savings rate. Indeed, very large capital inflows into the region are needed to close the domestic savings-investment gap, even though investment is at low levels to begin with. In the following three sections we discuss the key components of savings in turn to see where gains may come from in the future. We argue that increasing corporate retained earnings is the key short to medium term solution. Some policy measures to achieve this goal are briefly outlined.

Keywords: Investment; South-Eastern Europe; Savings (search for similar items in EconPapers)
JEL-codes: E22 O16 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2000-03-01
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