OREANDA-NEWS. April 15, 2014. A finance director survey carried out by SEB in Latvia shows that 49% of the largest enterprises in the Baltics rate their current business activity as stable.

The most positive rating among all the Baltic countries was given by enterprise representatives in Latvia – 57% of finance directors in Latvia, as compared to 52% in Lithuania and 37% in Estonia, rated the business activity of the enterprises that they represented as being favourable and stable.

Yet, irrespective of the positive forecasts, in conditions of post-recession a considerable degree of uncertainty regarding the stability of these trends can still be observed. Thus, the results show cautious optimism, which is noticeably corrected by economic development trends that differ slightly in each of the Baltic countries. The existence of demand, labour costs and raw material prices are the three major business challenges pointed out by large enterprises in the Baltics.
 
When also asked about financial indicators, finance directors at the Baltic's largest enterprises are even more positive – 59% of the enterprises operating in the Baltics rated their financial situation positively. The high rating reflects the result of the measures taken during the crisis, as stabilising the financial situation was a matter of survival for some entrepreneurs. In turn, the different rating given by the Baltic companies, ranging from 8% of those who state that the financial situation is not favourable to 23% of those who rate the situation as satisfactory, points to the difference in the situation for various enterprises as positive post-crisis trends have not yet brought about a full recovery from all the crisis hardships.

Allan Parik, head of Corporate Banking at SEB's Baltic division: "When assessing the concerns of entrepreneurs, it can be seen that labour costs are a much more urgent problem in Estonia, which was also confirmed by the entrepreneurs themselves. The falling and low levels of unemployment put pressure on wages, endangering competitiveness. The pressure will also gradually and increasingly continue in Latvia and Lithuania, making the problem more urgent in these two countries. Unemployment is decreasing in all the Baltic countries; therefore, the shortage of skilled labour becomes more acute. Forecasts indicate that this problem will be among top challenges in the near future."

In their ratings of cash-flow development, finance directors at the largest Baltic enterprises are very pragmatic when forecasting stability or slight growth – in 24% of the cases, finance directors expressed the conviction that cash-flow would remain at its current level, while 47% expected that the growth would not exceed 10%.

President of SEB in Latvia Ainars Ozols: "A larger share of optimists who forecast an increase of cash flow above 10% is in Latvia and Lithuania — 22 % and 20 %, respectively. In Estonia, only 12 % share this opinion. Such differences might reflect the common business environment in domestic and foreign markets which, in the Estonian case, shows that the forecasts of entrepreneurs are in line with slowing economic growth."

Finance directors at the largest Baltic enterprises also indicate that in the case of a positive cash-flow, enterprise representatives in the Baltics most often, i.e. in 27% of the cases, pointed, among other business decisions, to discharge of existing liabilities or reducing existing debt, or 44% of the finance directors indicated that these might be new investments. In the case of Latvia, lowering the level of obligations was the most frequently indicated option in case the enterprise had a positive cash-flow. In Estonia and Lithuania, the same percentage (47%) of enterprises indicated that investments in business development would the base scenario in case of a positive cash-flow.

SEB Baltics carried out the survey of finance directors at the largest enterprises in the Baltics at the end of February/beginning of March of 2014. About 200 enterprises from Latvia, Lithuania and Estonia participated.