Investors’ perception of CEE countries to improve in 2012, Equus

Central and Eastern European (CEE) countries have suffered since the onset of the global economic crisis, as investors have perceived other emerging markets, including the BRIC countries, as higher growth and lower risk.

However, according to advisory firm Equus, current indicators, including some very positive fundraising figures, suggest that this is set to change.

CEE actually weathered the financial crisis well, and as Western European counterparts have sunk back into a second recessionary period, the majority of CEE countries have not.
Moreover, gonsensus GDP growth for CEE in 2013 is around 2.5%, well above the Eurozone average, the firm added.

Unemployment is expected to reduce across the board, and the outlook is surprisingly good even in some of the smaller economies. Equus suggests that 10 out of 11 CEE economies comply with EU criteria in terms of GDP and public debt, while in Western Europe the figure is 4 out of 14.

“Bank financing in the larger economies is abundant, while mezzanine and other instruments are filling funding gaps elsewhere.

For private equity, this benign outlook is just part of the reason to expect a high level of private equity activity in the coming years, but the picture is not completely positive. In the first three quarters of 2012, just deals totalling just $1.6bn were completed – less than half the level seen in the whole of 2011,” the firm said.

Finally, the longer term indicator of fundraising –is hugely positive, with $4.1bn raised in the first nine months.

“This is way ahead of the $1.75bn raised in 2011 and back to levels seen in 2006. While these contradictory signals are partly a cyclical issue – a number of larger funds are in the market and therefore there is less money for firms to invest at present – it cannot be denied that a high level of private equity fundraising is positive for the future of the industry in the region,” Equus said.

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