Foreign direct investment (FDI) into Central, East and Southeast Europe grew in 2025, but gains were concentrated in just a handful of economies, a report from the Vienna Institute for International Economic Studies (wiiw) showed.

Across the region, FDI rose from around €75bn in 2024 to just over €91bn last year, an increase driven largely by one-off or highly concentrated surges in Russia and Romania, the report said.

In the case of Russia, inflows recovered from a depressed base but were distorted by sanctions-related financial restructuring rather than fresh investment activity.

“FDI picked up again from a very low level. However, this was due to a special effect resulting from the sanctions-driven restructuring of foreign assets held by Russian citizens, who transferred part of those assets back to Russia from offshore destinations. It does nothing to alter the difficult economic environment. Due to the sanctions, there are hardly any new projects from Western investors in Russia.”

The report said that while headline figures suggested stabilisation, underlying investor sentiment in Russia remained weak, with Western participation in new projects still largely frozen.

A different picture emerged in Romania, where foreign investment surged 45% in 2025, making it one of the strongest performers in the region and narrowing the gap with long-established investment hubs such as Czechia.

“The sharp rise of 45% in foreign direct investment in Romania highlights the country’s appeal to investors, despite the current economic and political crisis there,” said Olga Pindyuk, an economist at wiiw and author of the report.

“In 2025, inflows to Romania were thus almost on a par with those to Czechia, which has been one of the most important destinations for direct investment in Eastern Europe over many years.”

The investments came at a time when Romania is in the midst of a lengthy crisis. Protests sparked by the Constitutional Court of Romania's December 2024 decision to cancel the 2024 presidential election persisted into the first half of 2025.

The political turmoil continues with the pro-Western government formed in mid-2025 having recently collapsed and attempts to install a new government have so far been unsuccessful. That has stalled efforts to pursue urgently needed fiscal consolidation.

Elsewhere in the EU segment of the region, trends were mixed but broadly weak. While average FDI across Eastern EU members fell by a relatively modest 2%, individual countries saw sharply diverging outcomes.

Slovakia recorded a 79% collapse in inflows, while Estonia and Latvia saw declines of 95% and 83% respectively.

By contrast, inflows into Bulgaria rose 32%, Slovenia 19% and Poland 10%.

The situation was significantly worse outside the EU framework. In the Western Balkans, investment declined across the board, while war-hit Ukraine saw another steep contraction.

FDI into Ukraine fell 29% to €2.3bn in 2025 from 3.2 billion euros a year earlier, according to the report.

“The war naturally deters foreign investors, even though the country has enormous economic potential. Combined with the prospects of lucrative reconstruction, FDI in Ukraine could therefore boom once the war ends, and there are already early signs of this,” said Pindyuk, who also serves as wiiw’s Ukraine expert.

The institute warned that investment conditions could deteriorate further in the near term. It pointed to a sharp drop in early 2026 indicators, with newly announced greenfield projects down 44% in the first quarter compared with a year earlier, and committed capital falling 35% to the lowest level in six years.

“This suggests that foreign investors currently have even less confidence in Eastern Europe than they did at the start of the COVID pandemic and the Russian invasion of Ukraine,” Pindyuk said. “And the effects of the war in Iran have not yet been fully factored in here.”

Beyond cyclical weakness, the report highlighted deeper structural changes in the region’s investment model. Rising wages in Central and Eastern Europe’s more industrialised economies are reducing their attractiveness as low-cost manufacturing bases, prompting Western firms to reconsider their presence.

German and Austrian companies, long among the most important sources of FDI in the region, have also scaled back their commitments.

German investors reduced announced projects from 213 in the second quarter of 2025 to 144 in the first quarter of 2026, a 32% decline compared with the same period a year earlier. Capital commitments fell 5% to about €4.6bn, following a near 50% drop in the prior year.

Austrian investors committed around €1.3bn in the latest period, slightly above the previous €1.2bn, while the number of greenfield projects remained flat at 35, below pre-2025 levels.

The report also noted a continued shift in the origin of new investment flows. China remained the largest new investor in the region, with committed investment rising sharply from €9bn to €16.5bn, close to its 2023/24 peak.

“A great deal of Chinese money is flowing, on the one hand, into the construction of a production facility for carbon-neutral aluminium in Kazakhstan and, on the other, into the expansion of electric vehicles and battery production in Central and Eastern Europe,” said Olga.

Despite this surge, Chinese capital still represents a small share of the region’s overall investment stock. Around 70% of cumulative FDI originates from EU countries, led by Germany, the report said.