The survey describes how more than 300 large companies view the next 12 months. In the first half of the year, there were twice as many optimists in Lithuania as in Estonia, with Latvia falling somewhere in between, Peep Jalakas said.

Jalakas acknowledged that the broad tax increases, along with the prolonged discussion about new taxes in Estonia, is one of the reasons for the negative outlook.

"Business leaders dislike uncertainty and not knowing what to expect in the future," Jalakas said. "Lithuania has not experienced such widespread tax increases and the tax environment there has been more stable."

Lithuania's economy grew by 2 percent in the first half of the year, while Estonia's economy was in decline during the same period.

Compared to 2021, the optimism of chief financial officers at large Estonian companies has halved.

Jalakas also pointed out some signs of improvement in the survey. "The lowest point was in the first half of the year. The survey indicates that optimism has slightly recovered. The proportion of negative assessments has decreased," he said.

As for Lithuania's relatively better position, Jalakas attributed it to Estonia's focus on exporting to Scandinavia, particularly in connection with the real estate and construction sectors, while Lithuania has been more oriented toward Poland and Western Europe.

Additionally, the impact of interest rates on the economy has been more negative in Estonia than in Latvia and Lithuania, he added.

According to the survey, 29 percent of respondents in Estonia currently feel confident in the business environment (up from 25 percent last year). In contrast, 58 percent of chief financial officers at large companies in Lithuania are optimistic about the future, exactly double the figure in Estonia (51 percent last year). The figure in Latvia has remained unchanged at 40 percent year-over-year.

According to SEB's forecast, Estonia's economic growth is expected to recover in 2025, with the economy potentially growing by 2.5 percent, which is comparable to the growth projections for Latvia and Lithuania. However, Estonia's growth will come from a significantly lower base, as Lithuania's economy grew by 2.4 percent in the first six months of this year, Latvia's by 0.3 percent, while Estonia saw a decline of 1.6 percent year-on-year, Jalakas explained.

The greatest concern for companies in both Estonia and Latvia is the future of the economy, with 65 percent and 61 percent of survey respondents, respectively, sharing this view. In Estonia, the next major concerns are pressure on profits and prices (62 percent), geopolitical risks (54 percent) and rising labor costs (42 percent).

In Lithuania, only 36 percent of large companies see economic prospects as their main concern, a significant drop from 51 percent last year. Instead, the main worries in Lithuania are geopolitical risks and rising labor costs, both mentioned by half of the respondents. The survey also revealed that 46 percent of large Lithuanian companies are facing a shortage of skilled workers, compared to just 16 percent in Estonia.

The survey found that Latvian and Lithuanian chief financial officers are the most satisfied with their companies' financial situation, with 77 percent and 72 percent, respectively, rating it as very favorable or favorable. In Estonia, only 52 percent view their financial position positively, the lowest figure since the SEB survey began in 2014.

Moreover, the proportion of Estonian companies that consider their financial situation to be challenging has risen significantly, with 15 percent now expressing this view, compared to just 6 percent a year ago. "This is partly logical, given that the economic downturn in Estonia has persisted for more than two years and some companies' financial buffers are beginning to deplete. At the same time, if we look at the statistics, the quality of banks' loan portfolios remains good, the volume of business loans is increasing and the number of bankruptcies and restructurings remains low," Jalakas said.

SEB's annual large companies CFO survey took place in September of this year. A total of 302 chief financial officers from large companies across the Baltics responded to the survey: 85 in Estonia, 110 in Latvia and 107 in Lithuania. The participating companies typically have an annual turnover exceeding €20 million.

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