Development and Prospects of the Mechanical Engineering Sector in the Central and Eastern European Countries


Doris Hanzl-Weiss

wiiw Industry Study No. 1999/1, March 1999 plus free access to wiiw Industrial Database

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The mechanical engineering sector is a major supplier of technologically advanced equipment and thus plays a key role in every economy. It mainly produces investment goods in small and medium-sized enterprises not able to realize economies of scale. Under the communist system, the sector was given priority and was therefore of great importance in all Central and East European countries (CEECs). Strongly determined by business cycles, the mechanical engineering sector experienced a deep transformational recession after 1989. While maintaining its role as a major employer, the sector was forced to downsize in terms of production due to declining investment demand and structural adjustments. Today it holds a mid-range position in total manufacturing output. Outdated equipment and an increasing technological gap required large imports of mechanical engineering products and thereupon discouraged foreign investors. From 1996 growth rates or the sector were again declining and turned negative in most CEECs in 1996 or 1997.