ewald nowotny : cesee outlook - reconciling fiscal consolidation and growth opening remarks by prof dr ewald nowotny, governor of the central bank of the republic of austria, at the seminar on the imf ’ s regional economic issues report “ cesee outlook : reconciling fiscal consolidation and growth ”, vienna, 13 november 2015. * * * ladies and gentlemen, • on behalf of the oesterreichische nationalbank, i would like to welcome you to today ’ s seminar on the imf ’ s new „ regional economic issues report “, the rei. • the rei is a semiannual publication by the imf and assesses the macroeconomic outlook for the central, eastern and southeastern europe ( cesee ) region in light of the latest global economic and financial developments. • hence, this report covers more than twenty countries, including central and eastern europe ( cee ), southeastern europe ( see ), the baltic region, the cis group, and turkey. • cesee is a region of strategic interest for the oenb and is therefore in the focus of our analytical work. • this year, the oesterreichische nationalbank has the honour to host the launch of the new rei in vienna. the rei will then be presented in a series of seminars in several european cities, such as ljubljana and zagreb. • by launching the new rei here in vienna, the oenb continues a well - established tradition, as the oenb has already hosted several rei launches, with the last presentation having taken place in october 2013. • the title of this new rei is „ reconciling fiscal consolidation and growth in cesee “. this is without doubt a well chosen topic, which is also highly relevant in the euro area and in austria. • the rei shows that especially the central european countries are growing at a healthy pace, while russia, ukraine and the rest of the cis countries are in recession, mainly because of russia. overall, activity in the region is set to contract by 0. 6 % in 2015, but to expand by 1. 3 % in 2016. • compared to the 2015 spring rei, the policy challenges have not changed much and still include supporting domestic demand and rebuilding buffers against external shocks. • however, the balance of risks has shifted to the downside, as new risks stem from further slowdown in major emerging markets ( china ). the ongoing refugee crisis in europe constitutes a potential risk

a key term in this discussion : foreign direct investment ( fdi ). particularly in cesee and in china, increasing openness to fdi has contributed largely to growth performance. many empirical analyses have provided evidence on the relationship between fdi and growth. however, not only the fact that capital inflows take place, but in particular the way this capital is put to use plays a major role in achieving sustainable convergence. 4 direct fdi linkages between cesee, china and russia are very small in terms of volume. 5 our business panel discussion in the late afternoon will give us an opportunity to examine fdi from a practitioner ’ s perspective. at this point, let me draw a first conclusion. the relocation of production sites, catching - up in technology - intensive production and dynamic export growth in general are challenges to any economy. at the same time, they can be seen as opportunities to adapt institutional settings to promote sustainable, growth - enhancing development in the home markets. in this sense, the emergence of china and russia as global economic players offers clear opportunities. china and russia can become attractive target markets for exports – from cesee as well as from other regions. not only is china expanding its role as a supplier of goods, but both china and russia increasingly demand final products from abroad. although the eu - 15 remain the major trading partner for cesee, the region should make active use of china ’ s and russia ’ s growing demand for imported goods – particularly in the light of the recent economic and financial crisis. russia ’ s forthcoming accession to the wto will open new possibilities to strengthen the linkages in the real economy via fdi and trade and to foster financial linkages as well. so far, the financial ties between russia and cesee have been closer than those between china and cesee. chinese banks have started to invest in cesee only recently. moreover, china ’ s increasing investment in several sectors in europe proves that the financial linkages between these two economic areas will gain importance in the future. see e. g. firdmuc, j. and m. reiner ( 2011 ). fdi, trade and growth in cesee countries. in : focus on european economic integration q1 / 2011. oenb. china ’ s stock of fdi in cesee is very small and has been decreasing since 2000. bis central bankers ’ speeches in this context, i may add that only two weeks ago the oenb and the people ’ s bank