Although the war in Ukraine has not had a significant impact on the export plans of the Baltic companies, the general mood has become more subdued and the forecasts for the growth of turnover and investment plans are dominated by caution, “SEB Bank “survey of small and medium – sized enterprises.
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Compared to the forecasts of companies at the beginning of the year, expectations for an increase in turnover have changed dramatically. Turnover is currently forecast by 50-64% of Baltic small and medium-sized enterprises (50% in Estonia, 56% in Latvia and 64% in Lithuania), while in January 2022 only 15-24% of surveyed Baltic enterprises expected a decline in turnover.
The number of respondents who forecast an increase in turnover of over 15% has also decreased – if in January 2022 12-13% of companies were convinced that turnover would increase by more than 15%, now only 5-6% of companies in the Baltics expect such growth in May.
“Such a downturn could be hasty, as inflation could have a positive effect on turnover growth. However, this could be explained by concerns about the impact of rising prices on consumers’ purchasing power. is with Belarus and Russia, Latvia is in the middle, but Estonian companies are least affected by the impact of sanctions, “explains Arnis Škapars, a member of the Board of SEB banka.
High energy prices are currently the biggest challenge among Baltic SMEs (47-60% of Baltic companies; 60% of companies in Latvia). “This is quite understandable given the sharp rise in the prices of electricity, natural gas, heating and fuel. Accordingly, the impact of rising prices for goods and services, which may be at different rates in different sectors, can be felt further,” says Škapars.
The second most important challenge is supply chain problems – it is indicated by 28% of Latvian companies to 43% of Lithuanian companies. In turn, 15-20% of Baltic companies indicate that unpaid bills or late payments from customers cause problems. “This is a negative indicator that some sectors may experience liquidity problems and the need for working capital may increase significantly. However, the fact that only 4-8% of companies say they have difficulty accessing finance suggests that financial “The sector is responding quite well to the need for more liquidity funding since the start of the war,” said Škapars.
Compared to the forecasts of the January 2022 survey data, the number of companies planning any investments has decreased (from 42-50% to 27-31% of the total number of Baltic companies).
According to Škapars, this only confirms once again that we have a more cautious approach to the short-term development of the Baltic economies. Of those companies that are planning to invest this year, the majority will invest in improving production processes – in buildings, premises, equipment and other technical matters.
Compared to January 2022, companies have also become more cautious in forecasting an increase in the number of employees. At the beginning of the year, 15-24% of Baltic companies (15% in Latvia) forecast an increase in the number of employees, while currently only 2-5% of small and medium-sized enterprises plan to increase the number of employees.
“Of course, this is a negative indicator that could have a” cooling “effect on the labor market, of course, only if the forecasts come true,” comments Škapars. The share of companies planning to offer work to Ukrainian refugees is quite similar in all Baltic countries at 2-4%.
Despite the events in Ukraine, companies keep their export plans fairly unchanged, which is quite similar to the data of the January 2022 survey – 11% of Latvian, 10% Lithuanian and 9% Estonian companies plan to enter new export markets. The focus is primarily on the local market (76-81% of the surveyed Baltic companies).
“The cautious attitude towards export markets is an untapped growth potential in the segment of small and medium-sized enterprises, which also points to the need to encourage such a step for greater state support. Greater mutual cooperation could also improve the capacity of companies to enter new markets,” Škapars said.
A survey of SEB banka’s customer companies was conducted at the end of May to find out how the forecasts for Baltic small and medium-sized enterprises for 2022 have been changed by the war in Ukraine. 453 Latvian, 811 Estonian and 800 Lithuanian companies from various industries participated in the survey.
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