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Why the Baltics?

Sweden is one of the largest investors in the Baltic states with more than 1,500 Swedish subsidiaries already established in the region. A recently conducted business climate survey reveals strong growth and high expectations among Swedish companies in the Baltics.

The economic outlook from one of the major Swedish banks indicates that while growth patterns in the Baltics are becoming somewhat differentiated, growth in all three countries is expected to be robust and broad-based during the next two years. Latvia will join the euro area in 2014 and Lithuania is expected to follow in 2015. Unemployment rates are falling rapidly. Wage and price pressures are likely to rise towards the end of the forecast horizon in Latvia and Lithuania, similarly to what Estonia is already experiencing.

EXPORT-DRIVEN ECONOMIES

Exports play a significant role in the Baltic economies. The share of export in GDP is constantly increasing and reached 90 percent of GDP in Estonia, 59 percent in Latvia and 78 percent in Lithuania. Exports are expected to benefit from stronger demand in recovering EU economies in 2014 and 2015.

Graph export share in GDP

LOCAL DEMAND IS STRENGTHENING

Declining unemployment and a lack of skilled labour will be pushing the average wages. Growing employment and wages, somewhat lower taxes, low and stable inflation, and improving consumer confidence suggest that household consumption growth will accelerate.

Graph household consumption

INVESTMENTS WILL BOOST BUSINESS OPPORTUNITIES

Investments have been very weak, both in machinery and equipment and in buildings and structures. Companies have become cautious about investing. Since capacity utilisation is at a pre-crisis level or even above it in some sectors, producers need to invest to build up future export growth. The positive second-quarter data from the EU must serve to boost investment activity. The 2012 Swedish business climate survey indicates that until 2015, 200 MEUR of investments are planned from Swedish companies alone. Due to recovering export markets and increasing local demand, a further increase in investments is most likely, thus creating business opportunities for Swedish companies in the Baltic region.