Market Analyses and Risk Management: Baltic Marktanalysen und Risikomanagement: Baltikum

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Market Analyses and Risk Management
BalticMarktanalysen und Risikomanagement
Baltikum

• Dainis Dille
• Manager Credit Insurance, Coface Baltic, Riga

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The Baltic Market Estonia, Latvia, Lithuania
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General figures ESTONIA

• Population 1.4 million
• Area 45 000 km2
• Growth of GDP 4,7 in 2003. Forecast for 2004
  5,0 5,5
• Inflation 1,3 in 2003. Forecast for 20042,5
• Unemployment 9,3 (end 2003)
• Main export countries Finland, Sweden, Germany,
  Latvia, UK
• Main business sectors food, machinery and
  equipment, wood, textile
• No. of companies 80 thousand
• Currency EUR 1 EEK 15.65
• Source Statistical Office of Estonia

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General figures LATVIA

• Population 2,33 million
• Area 64 589 km2
• Growth of GDP 7,5 in 2003. Forecast for 2004
  6
• Inflation 2,9 0n 2003. Forecast for 2004
  3-4
• Unemployment 9
• Main export countries UK, Germany, Sweden,
  Lithuania, Estonia
• Main business sectors wood articles,
  textiles, metal industry, naschinery and
  electronics
• No. of companies 130 thousand
• Currency EUR 1 LVL 0,64 (Average in 2003)
• Source CSP,Latvia

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General Figures LITHUANIA

• Population 3.5 million
• Area 65 300 km2
• Growth of GDP 9 in 2003
• Inflation 1,2 Deflation in 2003. Forecast for
  2004 2
• Unemployment 10,3 (end 2003)
• Main export countries Switzerland, Russia,
  Germany, Latvia and UK
• Main business sectors textiles, mineral
  products, maschinery and equipment, food products
• No. of companies 160 thousand
• Currency EUR 1 LTL 3,4528
• Source Department of Statistics of Lithuania

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Business Environment in the Baltic Countries

• Economies in all three countries
• New and fast growing
• Open and export oriented
• The transit business plays a quite significant
  role
• Legal framework
• Relatively simple requirements for setting up
  the business
• No restrictions for foreign investors to
  repatriate the profit
• Legal proceedings sometimes take a lot of time

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Business Environment in the Baltic Countries

• Tax system
• Low corporate tax
• Contributions to social insurances are fully tax
  deductible
• Soft tax climate in Free Economic Zones

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Business Environment in the Baltic Countries

• Banking and Financial Sector
• Major banks are owned by large foreign
  (Scandinavian, German) banks
• Companies and individuals are benefiting from
  strong competition in banking sector interest
  rates for commercial and mortgage loans are
  coming closer to average in EU countries
• Banking and financial system is strong and well
  supervised

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Business Environment in the Baltic Countries

• Labor market and salaries
• Labor forces in all three countries are well
  educated - about 40 have higher education and
  close to 20 - special technical education.
• Wages and salaries are relatively low compared to
  the average in old EU member countries.
• Salaries for medium and top-level
  employees/managers are much higher than average,
  however, they also depend on the business sector.

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Business Environment in the Baltic Countries

• Companies in general
• More than 98 from all registered and active
  companies are considered as SMEs, majority of
  them have the legal form of Limited Liability
  Company.
• Private companies are dominating in almost all
  sectors of economies the State still has control
  (full or partial) in several sectors
  (electricity, railway, telecom).
• Management skills in companies are improving due
  to
• Management know-how comes through joint ventures
  and foreign companies/branches
• High number of managers is attending special
  courses or academic studies in highschools

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Business Environment in the Baltic Countries

• Companies payments culture
• The payments culture of Baltic companies is
  rather positive in case they are trading with
  foreign trade partners, but in domestic trade the
  delayed payments are increasing
• Instead of prepayments (within 4-5 years history)
  the trade credits starting dominate in domestic
  trade
• Debt managament (or understanding on it) in the
  companies is improving companies trying to use
  credit information credit insurance or factoring
  services
• Number of insolvencies in 2003 can be considered
  as not very high, but in the current year it can
  be expected higher due to significant price
  growing of raw materials, EU requirements and
  some legal aspects

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Trends and Forecast for the Baltic

• The fast economic growth is continuing in 2004
  and is expected in 2005
• Growth of GDP in 1Q of 2004
• In Estonia 6,8
• In Latvia 8,8
• In Lithuania 7,7
• Joining to EU and attractive tax system will
  promote significant FDI flow
• The second quarter of 2004 indicates the price-
  growing trend, which will make an impact to
  inflation level for whole year