Analytics, Banks, Business, Estonia

"The vast majority of SMEs operate in the local market. Growth in wages and purchasing power has boosted domestic demand, which in turn has improved business performance. This is also confirmed by the data of Statistics Estonia which show that, according to preliminary data, the total profit of the Estonian business sector grew by 4 percent last year. Although economic growth is expected to be moderate in the coming few years, focusing on the domestic market alone may no longer be sufficient," Leppanen said.

It appears from the SEB annual Baltic business barometer survey that about three in four Baltic SMEs sell their products and services on the domestic market, while 13% of such companies in Lithuania, 11% in Estonia and 7% in Latvia are planning expand to new markets this year.

The willingness to invest has increased the most compared with last year in Latvia, where the ratio of SMEs planning to make investments of up to 30,000 euros climbed from 22% to 36% . In Estonia the corresponding ratios were 22% and 25%, whereas in Latvia also the proportion of companies planning bigger investments had increased a bit.

Thus the willingness to make investments has not changed in particular in Estonia and Lithuania, whereas in Latvia explicit changes took place in comparison with 2018, with the share of companies planning to make no investments almost halving from 35% to 19% and dropping below the respective Lithuanian level of 23% and the Estonian level of 22%.

"It seems that recent positive changes in Latvian economy increased the motivation of and financial possibilities for the companies to invest," the authors of the survey say.

However, the share of SMEs that do not plan innovation increased among the companies in all three Baltic countries. Just in Latvia, the share of companies that plan product and service innovations was up from last year.

"Meanwhile, there was a drop in the number of companies which plan to invest in employee development. Such tendencies are worrying, taking into account the shortfall in innovative businesses compared with other EU countries," SEB said.