Analytics, Economics, EU – Baltic States, Good for Business, Investments

German investors rank Estonia, Latvia and Lithuania higher than the Czech Republic, Poland and Hungary. German investors' optimism concerning investment and business development plans for the Baltics has not decreased as compared to the past few years. Furthermore, projections for Latvian companies with German capital are favorable for this year and next, especially turnover and export projections.

On the average, 73% of companies in Estonia, Latvia and Estonia anticipate turnover growth of 8 percentage points to 14 percentage points this year as compared to 2016. The percentage of those expecting a reduction in turnover this year has decreased 11 percentage points from 2015 in Estonia, and 15 percentage points in Latvia.

48% of businessmen in Latvia and 49% in Estonia believe that the demand for new staff will increase. Availability of labor is one area where corrective action is needed in all three countries, the survey concludes.

44% of respondents in Latvia said they were planning to increase their investments, up from 35% in 2016 and 31% in 2015. In Lithuania, 49% of respondents said they were planning to increase their investments, 9% up from 2016, while in Estonia, slightly fewer businessmen are planning to increase investments as compared to 2016.

Just like local companies, foreign investors are also planning new investments. In April, Germany company HELLA said it would build a new production facility in Lithuania. Around EUR 30 mln will be invested in the plant that is to open in mid-2018 and initially employ 250 people. In 2016, the proportion of foreign direct investment by German companies in Lithuania was at 10.1%, in Latvia at 4.33% and in Estonia at 1.4%.

According to the survey, businessmen's opinion about predictability of Estonian economic policy, labor cost and tax burden has declined, but Estonia still ranks higher than Central and Eastern European countries.

Latvia received the lowest marks for corruption prevention measures, and businessmen's opinion about labor availability and public administration in Latvia has also declined. On the other hand, the opinion about transparency in public procurement, employees' productivity and motivation, quality and availability of local supplies has increased.

Businessmen interviewed for the survey also point to many improvements in Lithuania.

Vocational education in all three countries is believed to be better than in Central and Eastern Europe, but respondents say that further improvements are necessary.

AHK Executive Director Florian Schroder told LETA that eight in ten companies would repeatedly choose to invest in the country where they have made investments. "Of sixteen Central and Eastern European countries covered in the survey, Estonia, Latvia and Lithuania are ranked the highest," he said.

Commenting on Latvia, Schroder noted the need for reforming taxes and reducing the bureaucratic burden. "It appears that the Latvian economy is doing quite well, therefore the country is ready for reforms," he added.

One of the main advantages of Latvia, and one that German investors value very high, is the well-educated residents and their work ethic, but there are things to be changed in order to improve their professional and practical skills, said Schroder.

The annual survey conducted by the German-Baltic Chamber of Commerce was carried out in Estonia, Latvia and Lithuania between February 1 and March 1, 2017. It is part of an international survey carried out in Central and Eastern European countries. This year 1,734 businesses took part in the survey, of which 170 represented the Baltic countries.