Press Release
AHK survey: The war in Ukraine has both short and long-term consequences in the Baltic States
The German-Baltic Chamber of Commerce (AHK) conducted the annual business survey among its members from 30 March to 22 April. The survey was conducted simultaneously in 16 countries in Eastern and Central Europe and more than 830 companies took part, including 71 from Estonia, Latvia and Lithuania.
This year's survey also looked separately at the economic consequences of the war in Ukraine started by Russia. The results show that companies operating in the Baltic region see both short-term and long-term consequences for their business.
The greatest fear of Baltic companies is higher costs for energy, raw materials and labour in the short term as a result of the Russian invasion of Ukraine. This is categorised as a high risk by 67% of the companies surveyed in Estonia, 77% in Latvia and 54% in Lithuania. Almost half of the companies surveyed in the three Baltic countries fear disruptions in supply chains and logistics. The fear of increased legal uncertainty is twice as high in Latvia as in the two neighbouring Baltic countries. The increase in trade barriers also concerns more companies in Latvia than in Estonia and Lithuania. In contrast, almost twice as many of the companies surveyed in Lithuania are concerned about the loss of business partners and business relationships than in Latvia and Estonia. Almost half of the Lithuanian companies surveyed also fear a reduction in work orders as a result of the war. This concern is less pronounced in Estonia and Latvia.
One major concern of companies in the Baltic region is the long-term change in transport routes. A third of the companies surveyed in Estonia fear that business relationships with certain regions will be terminated or restricted in the long term, that suppliers will become more diversified and that there will be an economic decoupling of world regions.
In Latvia, half of the companies surveyed suspect that business relationships with certain regions will be terminated or restricted and that the world regions will be decoupled. Companies operating in Latvia also recognise the high risk of increasing protectionism.
In Lithuania, respondents also emphasised the relocation of branches, which could lead to production at new locations.
Apart from the war in Eastern Europe, more than half of the Baltic companies surveyed also see the shortage of skilled labour as one of the biggest risks for the future of their company. Concerns about labour costs are also correspondingly high: more than 60% of the Lithuanian companies surveyed rate these two risks as very high, but every second to third respondent in Estonia and Latvia also emphasised these two risks.
When asked what measures companies have already taken or plan to take to mitigate the consequences of the shortage of skilled labour, Estonian companies responded with the expansion of in-house training and the increased use of temporary workers, including the recruitment of foreign skilled workers.
In Latvia, half of the companies surveyed are relying on the increased use of temporary labour. A smaller proportion plan to recruit labour from abroad and expand in-house training.
In Lithuania, half of the companies surveyed are relying on in-house training, but also on raising wages above the market average and increasing automation and digitalisation.
When asked whether the framework conditions for sourcing labour from third countries should be relaxed, almost 80% of the companies surveyed in Estand responded in the affirmative. 30% are of the opinion that the framework conditions should definitely be relaxed. 65% of the Latvian companies surveyed are in favour of easing the framework conditions. In turn, 19% of them believe that this relaxation is definitely necessary. In Lithuania, over 80% of the companies surveyed believe that the framework conditions need to be relaxed and half of these consider the relaxation to be essential.
Rising labour costs were seen by 87% of the Estonian companies surveyed as a problem that is either already affecting companies or will affect them in the near future. 8% of respondents consider this problem to be so serious that they are even considering relocating. In Latvia, more than 85% of those surveyed consider this problem to be either already present or to arise in the near future. However, relocation is not yet an option for them. In Lithuania, 90% of the companies surveyed were of the opinion that the problem of rising labour costs either already exists or will require solutions in the near future. 4% of respondents are also considering relocating in this regard.
The positive news is that the absolute majority of companies surveyed in Estonia, Latvia and Lithuania would choose the Baltic States as their investment location again.
The German-Baltic Chamber of Commerce is part of the German network of bilateral chambers of commerce abroad, which covers more than 90 countries worldwide. The AHK has been active in the Baltic states for more than 25 years and currently has more than 400 members.