VILNIUS - A recent survey of German companies in the Baltics has shown that 90 percent of them expect their companies to fare badly in 2009, citing weak government leadership as a stymieing factor to quicker recovery.
Nine out of ten companies expect further economic decline in 2009 with the remaining 10 percent forecasting at best a stabilization of the current downward trend, the annual business survey of the German-Baltic Chamber of Commerce in Estonia, Latvia, Lithuania (AHK) revealed.
AHK President Gunter Dunkel said that a stable environment would help companies recover.
"Due to the current economic crisis the Baltic states face tremendous challenges. In the current situation political and economical stability and predictability are of utmost importance. Especially in times of great economic uncertainty, companies want and need to operate in a stable framework which offers reliable parameters for their entrepreneurial decisions," he said.
Aspects considered problematic by German companies are the unsatisfactory prevention of crime and corruption, as well as government services cited as lacking efficiency and service orientation.
Earlier, Swedbank board member Tomas Andrejauskas said the Lithuanian government needed to work toward helping business recover.
"The Lithuanian economy needs to be reanimated and the authorities' efforts to increase budget revenues did not give the wanted result. Regulating taxes and expenditures, the state is affecting the environment of the national economy, therefore today [the] time has come to start implementing measures in order to encourage instead of restricting business. Saving has for a long time become a necessary condition of living and the main challenge now is the improvement of business economy," Andrejauskas said.
The outlook is very pessimistic for German companies.
"Despite the turnover and profit increase achieved by more than one third of the respondents in 2008, the German companies are not able to get around the general market downturn anymore," an AHK press release said.
Only 10 percent of respondents expect further growth of turnover and profit, while the majority anticipates a decline of both figures. Despite this, two thirds of respondents characterize the situation of their company as "more or less stable."
"The evaluated expectations of German companies in the Baltic states are strongly influenced by the current economic crisis, which has badly affected Estonia, Latvia and Lithuania and the end [of which] can not be predicted yet," Maren Diale-Schellschmidt, CEO of the AHK, said on May 6.
"German companies have stressed an immediate need for policy action and a series of measures taken by the respective governments to tackle the economic crisis. However, the trust in the government's ability to cope with the crisis is rather low," the AHK press release said.
"Only 20 percent of all respondents assess the measures already taken to overcome the financial crisis and face the looming recession as satisfactory and target-aimed. The survey results further indicate that emphasis has to be laid on economic policy which should follow a clear long-term strategy."
Government organizations and institutions have also been called upon to improve transparency in public tenders and access to public and EU funds, as well as the insufficient infrastructure for research and development. AHK represents around 370 members in the Baltic states.
Meanwhile, the government's stimulus package lending money via banks to small and medium enterprises (SMEs) has begun with Siauliu Bankas lending money to businessmen.
"A new program of state-supported small credits generated huge interest of the entrepreneurship; from the implementation of the first small credit granting stage now on we have received more than 50 applications 's that is, in two weeks time. Financing of the small businesses is the basis for the Siauliu Bankas, so the organization hopes to lend the received financial resources to SMEs," said Daiva Kiburiene, Siauliu Bankas deputy CEO and head of the corporate and retail banking division.