Baltic businesses rate Lithuania's investment environment highest - SEB

TALLINN - A SEB survey conducted among large Baltic companies reveals that in many economic indicators, neighbors are considered the best; Baltic entrepreneurs agree on only two issues: Lithuania is the best destination for foreign investment, and they are not satisfied with their own governments.

According to the survey, dissatisfaction is highest in Estonia. In Latvia, the state's economic policy is rated slightly higher, but dissatisfaction generally prevails. Lithuanian entrepreneurs acknowledge problems but consider the government's focus on supporting investments and domestic demand to be largely correct.

When asked which Baltic country is the best place for foreign investment, 67 percent of Estonian and 64 percent of Latvian entrepreneurs named Lithuania first. Lithuanians themselves believe that after their country, Estonia offers the best environment, as stated by 22 percent of respondents.

"Although Lithuania is seen as the best for investments, all three countries consider the instability of their tax systems a weakness and envy their neighbors, whose tax environments seem more stable. While 65 percent of Estonian companies believe Lithuania's competitive advantage is a stable tax policy, only six percent of Lithuanian companies share this view. Meanwhile, 37 percent of Lithuanian companies highlight Estonia's tax policy as a strength in comparison to other Baltic states, and 65 percent point to a favorable cost base. The grass always seems greener on the other side," said Peep Jalakas, Head of Corporate Banking at SEB.

According to him, foreign investment is key to increasing the competitiveness of the entire region. "The credibility of the economic environment and the stability of business depend directly on how well governments can provide a clear tax policy, strong infrastructure, and security. Given our geographical location, this is more important than ever for ensuring competitiveness," Jalakas added.

Looking at the Baltic states more broadly, Estonia is characterized by the most advanced digital infrastructure and a flexible business environment, but recent tax increases and a slow economic recovery have reduced entrepreneurs' confidence.

Lithuania, on the other hand, stands out with a stable domestic market and strong economic growth: growth is forecast at 2.7 percent for 2025 and 3.1 percent for 2026. Latvia falls between its two neighbors, offering foreign investors lower labor costs and a more balanced price level, but suffers from a slow pace of reform.

In all three countries, security is seen as critically important for business and investment. Consequently, the establishment of the Baltic defense line was rated as the most important joint project of the Baltic states. According to the survey, Latvia feels the most secure in the changed security situation, followed by Lithuania and Estonia. In addition, entrepreneurs consider it important to strengthen cross-border cooperation, especially in areas related to energy markets, transport, and the regulatory framework.

Although the external environment remains uncertain, most large Baltic companies plan to invest in digitalization, innovation, and automation in the coming years. "These are areas that create a competitive advantage for the future and give companies the strength to adapt to changes," noted Jalakas.

SEB's annual survey of CFOs of large Baltic companies was conducted this September. The survey was answered by 312 CFOs of large companies in the Baltic states: 117 in Estonia, 103 in Latvia, and 92 in Lithuania. The annual turnover of the companies participating in the survey generally exceeds 10 million euros, and their total sales account for nearly two-thirds of the annual turnover of all Estonian companies.