German Companies Mainly Optimistic in Baltics (1)
After two difficult years, German companies in the Baltics are experiencing a noticeable upward trend and make further investment plans. This is the main result of the 2011 business survey conducted by the German-Baltic Chamber of Commerce among 97 German companies in Estonia, Latvia and Lithuania.
After the rockbottom in early 2010, the Baltic economies are on the upswing again and more than 60 percent of the German investors are expecting an improvement on the macro-economic level. Currently, however, more than half assessed the situation only as satisfactory and about one-third as outright bad.
With respect to their own situation, the majority of German companies in Estonia and Lithuania considered it good and in Latvia, satisfactory. In all three Baltic States respondents see their companies going in a positive direction in the upcoming years: more than 90 percent foresee a further improvement of their business situation or expect at least a steady development of their companies.
"The expectations of the German companies are showing a clear upward trend – not least because of the stabilization of the economic situation. The pre-crisis levels, however, have not been reached yet," said Jörg Tumat, Vice President of the German-Baltic Chamber of Commerce in Estonia, Latvia, Lithuania, commenting on the results of the survey on May 9.
More than 90 percent of the German companies in the Baltics profited directly or indirectly from the recovery at home and were able to increase or at least stabilize their exports to Germany in 2010. Almost the same number of respondents expects a similar development for 2011.
Given the positive prospects, about 85 percent of the respondents are planning to increase their investments in 2011 or at least to keep them at the current level. One in three of the respondents plans to hire new employees, but with continuing improvement of the economy, the lack of qualified labor is once again feared to become a hindrance for the real upswing. The situation is further complicated by high structural unemployment, demographic change and expected labor migration resulting from the full opening up of the European labor market on May 1, 2011. More than two-thirds of the respondents expect a migration of workforce from Estonia, Latvia and Lithuania.
"The labor market remains a constant worry – especially the education system is in need of improvement," said Maren Diale-Schnellschmidt, CEO of the Chamber. "In order to ensure an adequate fit between supply and demand on the labor market, comprehensive reforms and qualification efforts are necessary.” German companies would therefore welcome further improvements in the field of labor legislation and more practice-oriented vocational education in the Baltics.
With regard to economic policy, the respondents emphasized the need for a clear and long-term economic strategy focusing on improving the competitiveness of the Baltic economies. Some respondents also cited a lack of a clear vision of the governments for the development of the respective country.
Despite some criticisms, the Baltic States are still seen as attractive business locations by German companies in comparison with other Central and Eastern European countries as well as Germany and China. For the first time since 2008, a Baltic country made it to the top of the list – with Estonia achieving the best result. Latvia and Lithuania also improved their rankings and are now placed fourth and seventh respectively as investment destinations.