Strong growth in Baltic economies creates opportunities for Wisconsin companies

September 1, 2020
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Why this is important to Wisconsin businesses: With rapid post-pandemic recovery projected, Estonia, Latvia and Lithuania are in need of machinery, chemicals and technology solutions.

Located in northeastern Europe, the Baltic states (Estonia, Latvia and Lithuania) have a combined population of 6 million. In 2019, the GDP per capita (adjusted for purchasing power parity) was $36,701 in Lithuania, $35,853 in Estonia and $30,830 in Latvia. The Baltic States have followed similar trajectories of economic development, reaching  steady growth in real GDP in recent years (Latvia: 4.3% in 2018 and 2.2% in 2019; Lithuania: 3.6% in 2018 and 3.9% in 2019; Estonia: 4.8% in 2018 and 4.3% in 2019). However, the pandemic led to a sharp drop in GDP in the Baltics in the first quarter of 2020 (Latvia: -8.6%; Lithuania: -8.1%; Estonia: -7.5%). Still, in comparison with negative GDP growth of the whole Euro zone in that period (-8.3%), the Baltic states were no different.

However, according to the IMF, the Baltic states are expected to be among the EU countries with the highest growth in 2021, with Latvia’s GDP expected to grow by 8.3%, Lithuania’s by 8.2% and Estonia’s by 7.9%. One reason for the expected quick recovery is the highly advanced information technology (IT) infrastructure of the Baltic states.

In addition to their positive growth outlook, all three states rank in the top 20 of the World Bank’s Ease of Doing Business ranking and thus are considered stable settings for international business.

Major investments into the expansion and development of the Baltic states’ infrastructure will have a positive impact on trade. An example is the Baltic Railway project, begun in 2020, which entails the construction of a railroad line connecting Tallinn and Warsaw. As a major IT innovation hub for the region, the Baltic states have also invested heavily in IT infrastructure, and their government policies promote IT solutions to improve efficiency in businesses and in the public sector. Other major industries of the Baltic states include wood and paper processing, furniture manufacturing, food, engineering and vehicle construction as well as the chemical industry (with the last being especially important for Lithuania).

The expected economic expansion and productivity pressure will stimulate the demand for machinery in these markets. The planned infrastructure projects also lead to a rising demand for resources and machinery components in the construction engineering sector. Machinery and parts imports from Wisconsin have thus already shown strong growth for 2020 so far, especially for electrical machinery. While Wisconsin companies exported electrical machinery worth $680,000 to the Baltic States in 2019, the export value increased to $1.3 million from January to August 2020, nearly doubling the amount for the entire year prior.

The chemical industry is currently the leading sector with the highest import volumes from Wisconsin. This includes chemical materials and also technical equipment. In 2019, exports of miscellaneous chemical products from Wisconsin companies to the Baltic states amounted to $3.2 million, of which the bulk ($2.7 million) was exported to Lithuania. Even with the pandemic, further opportunities in this segment exist, as the region’s imports of chemicals from Wisconsin continued to increase through July 2020.

Further growth is expected in the areas of digitization, IT programs to support business processes, financial technology, cybersecurity solutions, and software programs for the health care sector—all of which offer opportunities for Wisconsin companies.

The business-friendly environment, ongoing infrastructure investments, a growing chemical market and the focus on modern IT technology make the Baltic states a hidden gem among export markets for Wisconsin companies. A good opportunity to get further insight is the annual international TechIndustry event in Riga (Nov. 26-28, 2020 / Nov. 25-27, 2021: It is the biggest trade fair for industrial production and innovative technology in the Baltic states, with a particular focus on mechanical engineering, metalworking, automation, electronics, electrical engineering, industrial supplies and tools.

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