Baltic countries have many advantages for attracting and retaining investment - Dombrovskis

RIGA - Latvia, Lithuania and Estonia are pursuing relevant policies to strengthen the resilience of their economies, and the Baltic countries have many advantages for attracting and retaining investment, Valdis Dombrovskis (New Unity), European Commissioner for the Economy, Productivity, Implementation and Simplification, said the event "Beyond Borders: Investment & Security in the Baltics", hosted by the Foreign Investors' Council in Latvia (FICIL).

Dombrovskis said that cooperation among Estonia, Latvia and Lithuania is as important now as it was when our countries regained their independence.

"Our future success depends on regional unity, policy clarity and strong support from the European Union (EU), especially in the face of geopolitical change and economic uncertainty," Dombrovskis stressed.

Investment is a catalyst for growth, productivity, innovation and job creation, he said, but for investment to work to its full potential, there must be a foundation of stability and security. However, in the current geopolitical reality, this foundation seems weaker than at any time this century.

Dombrovskis stressed that the Baltics' main challenge is to maintain security by taking greater responsibility for defense.

He said that the Baltic states are key supporters of Ukraine, providing the financial, humanitarian and military assistance necessary to enable Ukraine to continue to stand up to Russia. In addition, Latvia, Lithuania and Estonia have shown foresight over the years by investing to improve their defense capabilities.

The Baltic countries have a strong voice in the EC and can also count on broader regional support. "The Baltic states have strong support from the wider region and the EU as a whole to understand that Europe is taking more responsibility for its own defense," Dombrovskis said, stressing that Europe has every advantage over the Russian aggressor in terms of economic weight, technology and population.

Dombrovskis explained that these advantages should be exploited by renewing Europe's defense capabilities and developing the defense sector, but that this would require significant investment.

According to the EU commissioner, the bloc has already taken resolute action with the ReArm Europe initiative, which will mobilize an additional EUR 800 billion for defense spending across the EU. This will facilitate a rapid increase in defense spending by allowing member states to temporarily depart from their normal fiscal requirements.

He also said that Latvia, Lithuania and Estonia have decided to request the activation of the national exemption clause.

In addition, EU ambassadors last week reached agreement on a new EUR 150 billion lending facility, with a vote scheduled for May 27. This instrument will provide loans to member states to invest in areas such as missile defense, drones and cyber security.

"My message is very clear. The EU is now taking bold steps to strengthen our defense. This is the most important step we can take to strengthen the investment climate in the Baltic states too and ensure the long-term prosperity of the region," Dombrovskis said.

While security remains a key policy priority, other strategic objectives must not be neglected. Investment also requires macroeconomic stability, Dombrovskis noted.

Since joining the EU, the Baltic countries have undergone dramatic economic change. Although the current economic situation is difficult, growth is continuing, and the latest EC economic forecasts predict growth of between 2 percent and 3.1 percent in all three Baltic states next year, which is above the EU average of 1.5 percent.

"This also reflects how all three countries are implementing a set of relevant policies to strengthen the resilience of their economies. This is very important because weak economies are easy targets for populists and aggressors," Dombrovskis said, explaining that the Baltic countries have many advantages for attracting and retaining investment.

Dombrovskis said that while the general sentiment of foreign investors about the investment climate in the Baltics is cautiously optimistic, the region still faces particular challenges that hinder investment growth, many of them a consequence of Russia's war of aggression against Ukraine.

"These include higher energy prices, a decline in foreign direct investment, a more complex foreign trade environment and perceptions of geopolitical risks. The EU recognizes these challenges and is providing direct financial support for measures to address them," Dombrovskis said, adding that the current EU budget already provides significant funding opportunities for the region under various programs, notably the Recovery and Resilience Facility and Cohesion Policy.

Dombrovskis stressed that it is important that the Baltic states continue to focus on the efficient use of EU funds to enhance security, boost economic activity and improve living standards.

Dombrovskis said that the deputy managing director for cohesion and treform is working on tailor-made support for the eastern border regions through the EU's multiannual budget beyond 2027. He will visit Latvia and Estonia next month.

When it comes to tackling the economic challenges facing the Baltic countries, the EC is working to improve the business and investment climate in the region. The investment climate in the Baltic countries will also benefit from the EU's broader agenda to improve competitiveness, Dombrovskis said.

"We are making the most of our key economic advantage - the single market of 450 million consumers - by breaking down remaining barriers to boost the EU economy while attracting global talent and investment," Dombrovskis said.

"The EC is committed to building a stronger, safer and more competitive Europe," Dombrovskis said, noting that Baltic unity should be further used to influence broader EU and NATO policies and strengthen our economic and security position.

He stressed that the Baltics must first ensure the security of the region by continuing to invest in collective defense, and second, act together to attract and promote the investment that the Baltic countries need to unlock the full economic potential of the region and ensure its long-term prosperity.