The Polish Economic Institute (PIE) has analyzed a few scenarios for Central Europe in a special report, as it believes that the coronavirus pandemic poses both a challenge for the region while simultaneously opening up several opportunities.
The threat of bankruptcy that international companies face may lead to a loss of commissions for subcontractors in the region. On the other hand, the retreat of Western companies creates space for local companies to rise and fill in the gaps. The Three Seas countries may also benefit from the return of industry back to Europe.
“The initiative has a chance to create a new development model for Central Europe,” the report reads, adding that while some economies may be affected by the automotive industry crisis, shifts in delivery chains and the return of production from Asia to Europe may be an opportunity for new investments for the region.
What is most important for the Three Seas is the financing of its number one project – the development of infrastructure connections in the region. Without this, Central Europe’s economic growth may stagnate.
The Three Seas is meant to change the detrimental trend of investing in infrastructure connections leading to Western Europe. This is why so much of Europe’s infrastructure is lacking on a North-South axis.
The PIE report state, that this is a major factor that led to stagnation of trade between Three Seas states. Since 2004, trade exchange as part of the Three Seas has tripled, from €66 billion to €227 billion in 2018. Yet trade in the region has swiftly stagnated — since 2012 the share of Three Seas markets in export has maintained a level of 35 percent of exports within the whole EU.
Central-Eastern Europe’s economic integration with Western Europe has proceeded far quicker than between particular Three Seas states. Small economies are the most well integrated within the region, such as Slovakia, Croatia and Latvia. Meanwhile, the three largest economies of Poland, Austria and Czechia are integrating at the slowest rate, whereas they should be the ones driving integration in the regional economy.
The main source of money for infrastructure projects come from the budgets of member states and EU funds. Meanwhile, the economic drop due to the crisis and the limits on EU funds between 2021-2027 disbursed to the Three Seas states mean that money must be found elsewhere.
PIE experts believe that a new source of income may be non-European development institutions from countries such as the United States, Japan and China. Another solution would be to attract of private capital interested in long-term infrastructure investments.
The region could use new tools for mobilizing private investments and base them on already functioning programs such as the Investment Plan for Europe.