Looking for Business in the Baltics
The Baltic States, i.e. Estonia, Latvia and Lithuania, are doing pretty well economically. According to Eurostat, GDP growth in Q1/2017 was 4% in Estonia, 4% in Latvia and 4.1% in Lithuania compared to the same period in 2016. Private consumption is and will remain an important growth driver. There is robust growth in manufacturing, trade and construction. Our main export partners in Scandinavia and in Germany are also doing well, which means that export-driven sectors in the Baltics are experiencing growth in demand. The big international retailers Ikea and Lidl have also noted this market potential and are expanding.
Public investment in infrastructure supports growth. The inflow of EU funds benefits both the public and private sectors. Negotiations concerning the massive Baltic Rail project are in progress, but an agreement is beginning to look likely.
The Baltic States have traditionally been seen as sources of cheap labour and of subcontractors. Our subcontractors in metalworking, machine building, woodworking and electronics are still doing well, but wage pressures are increasing. During the past five years, wages have risen by around 5% each year. Higher wages are forcing companies to invest in new machinery and processes to improve productivity. These changes are creating opportunities for Finnish companies in the area of industrial automation. A recent survey by Swedbank found such opportunities in sectors like prefab housing, furniture, metalworking and wood products.
The following example taken from one of my own projects illustrates what is happening. I recently had a Finnish metalworking company as a client. They manufacture components for construction machines and forest machines. We visited some potential clients in Estonia and Latvia and my client got several orders immediately. During the visits we learnt that the Finnish components were actually cheaper than similar components made by Baltic competitors. And the reason is the high level of automation in the Finnish company.