Analyzing the FDI dynamics and the investment climate impacting the economic development of BSEC

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The paper concentrates on the analysis of inward and outward FDI in the BSEC countries, their structuring by countries of origin and destination, and how the investment climate (in particular economic freedom and economic development) affects the actual FDI influx in the region. The BSEC countries became considerably attractive for FDI at the beginning of the 2000s, and now they receive about 4% of the world FDI. All the BSEC countries are net recipients of FDI, but some of them also actively invest abroad. Most FDI to the region originates in Europe. FDI is the most important for several small BSEC economies, especially in some periods when they made a significant contribution to capital formation. Despite a temporary increase in imports, FDI also helped to stabilize the balance of payments. Most BSEC countries usually outperform average countries worldwide by trade freedom, low tax burden, fiscal health, financial freedom, property rights, and low inflation. However, this group of countries is quite diverse by particular indicators. Corruption and excessive regulations often act as the drawbacks for the investment climate. The overall economic freedom and low tax burden are the strongest determinants of inward FDI to the BSEC countries. Improving the overall economic freedom, protecting property rights, and better control over government spending are the most crucial for stimulating economic growth. Economic growth and trade freedom are less important factors for FDI.

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    • Table 1. Trends in the BSEC countries’ inward FDI, %
    • Table 2. Trends in the BSEC countries’ outward FDI, %
    • Table 3. The main sources of FDI in the BSEC countries in 2018, %
    • Table 4. Importance of FDI for the BSEC economies
    • Table 5. The effect of FDI on imports and income payments, average values in 2010–2019, %
    • Table 6. Investment climate indicators of the BSEC countries
    • Table 7. The economic freedom subindices of the BSEC countries, score
    • Table 8. Correlations between inward FDI/GDP (%) and GDP growth (%) and economic freedom (score) in 1995–2018
    • Table 9. Correlations between inward FDI/GDP (%), GDP growth (%) and economic freedom subindices (score)
    • Conceptualization
      Evangelos Siskos, Konstantia Darvidou
    • Data curation
      Evangelos Siskos, Konstantia Darvidou
    • Investigation
      Evangelos Siskos, Konstantia Darvidou
    • Methodology
      Evangelos Siskos, Konstantia Darvidou
    • Resources
      Evangelos Siskos, Konstantia Darvidou
    • Supervision
      Evangelos Siskos
    • Visualization
      Evangelos Siskos, Konstantia Darvidou
    • Writing – original draft
      Evangelos Siskos, Konstantia Darvidou
    • Formal Analysis
      Konstantia Darvidou