SEB: Corporate CFOs expect economic recovery and development

For companies in the Baltic countries, the year 2024 has been overall more favourable than the previous year. As for 2025, there are a number of factors that allow cautious optimism to be maintained, according to the Survey of the CFOs of large Baltic companies conducted by SEB*. Among the favourable factors mentioned are the falling interest rates, the recovery in household purchasing power and the relatively low volatility of commodity prices. In the view of the financial directors in Latvia and Lithuania, the current financial circumstances of companies and the development forecasts for the coming year are significantly more favourable than the circumstances in Estonia. Economic development and geopolitical risks continue to be the main concerns of business people in the Baltic States with regard to future development opportunities.

“The results of this year’s survey of CFOs show that companies are gradually regaining confidence in the development opportunities of the near future. This is reflected, for example, in a much more ambitious assessment of investment opportunities. The more positive assessment is linked to falling interest rates, the return of purchasing power and the more optimistic outlook for export markets. There are differences between the financial managers of Latvian, Lithuanian and Estonian companies, as the Estonian economy is facing greater challenges and the previously steady growth has come to a halt. The main concerns of business people in the Baltic countries continue to be geopolitical risks and the general economic situation,” the survey data are commented by Ints Krasts, a member of SEB Management Board.

The assessment of the business environment is the most positive in Lithuania and Latvia, more pessimistic in Estonia CFOs in Lithuania are the most positive about the business environment for the next 12 months. 58% of respondents rated the business environment as good or very good. In Latvia, 40% of respondents gave such an assessment, in Estonia - 29% of respondents. This assessment reflects the development of the economy in the Baltic states - in the first half of 2024, Lithuania’s GDP increased by 2.4% compared to the previous year, while Latvia’s GDP increased by 0.3% and Estonia’s GDP decreased by 1.6%. Lithuania’s economy was favoured by less dependence on exports to the Nordic countries and greater diversification of export markets and goods (services). According to SEB economists’ forecasts, the economic environment could improve in 2025 due to the recovery in exports and purchasing power combined with lower interest rates.

CFOs in Latvia rated the current financial position of companies as the best - 77% of respondents rated it as good or very good, compared to 52% in Estonia (the lowest rating in ten years), and 72% in Lithuania.

Source of major risks

As for companies’ concerns about the factors affecting business, there are significant differences in the Baltic states. In Latvia, economic development and geopolitical risks are the main concerns, in Lithuania it is rising labour costs and geopolitical risks, and in Estonia it is economic development and a possible price increase. In Latvia, concerns about increasing competition from foreign companies have risen significantly over the last four years (from 6% in 2021 to 23% this year), and CFOs continue to worry about economic development and cyber risks. However, the risks that demand could fall or prices could rise again seemed less likely to Latvian respondents this year.

Lithuania stands out from the other Baltic countries in terms of the proportion of CFOs who are concerned about the rise in labour costs. These concerns are usually more pronounced during economic expansion. In Q2 2024, average labour costs in Lithuania, Latvia and Estonia increased by 12%, 9.2% and 4.7% year-on-year respectively.
It should be noted that a factor such as lack of capital in large companies was not mentioned among the main challenges for business development. 

Priorities in Latvia – automating and digitising

The CFOs of Latvian companies named the need to automate and digitalise business processes (26%), launch new products or services (24%) and improve the company’s cash flow (19%) as the three top priorities for the coming year. In Lithuania, on the other hand, entrepreneurs consider investments to increase business capacity to be very important (24%), while in Estonia CFOs want to pay the most attention to increasing cash flow (24%). In all Baltic countries, the proportion of CFOs who see expansion into new markets as a priority for the company in 2025 is quite low.

In terms of investing free funds, around half of companies in Latvia (53%), Lithuania (49%) and Estonia (57%) are willing to invest them in their country’s economy next year, while around a fifth want to repay loans. Compared to 2023, the number of CFOs who believe that business investment could be increased next year has risen significantly. In Latvia, 19% of respondents spoke of increasing investments (last year: only 4%).

*Once a year, SEB conducts a survey among the CFOs of the largest companies in the Baltics to determine their assessment of the business environment, key challenges and other issues. The survey was conducted in September 2024 and 302 companies from Latvia, Lithuania and Estonia took part. SEB has been conducting such a survey since 2014