Latvian companies stand out against the rest of Europe with their willingness to invest in development. This is evidenced by a new comprehensive study by the European Investment Bank, which surprised even some politicians, reports TV3 News.
In April, a new office of the European Investment Bank (EIB) was ceremoniously opened in Riga. This institution has already financed large projects in Latvia totaling several billion euros, and the opening of the office signaled its intention to deepen its presence in our economy.
This week, representatives of the bank invited politicians and other interested parties to present the results of their annual investment survey, which involved about 12,000 companies, including around 400 from Latvia. It turned out that Latvia stands out against the general backdrop.
Overall, the share of companies that invested last year increased. In Latvia, this figure was 75%. Although this is below the average level in the European Union, Latvia outperforms other countries in investments in innovation — 45% of investments were directed towards new products, processes, or services.
Latvia also stands out in its future plans. The share of companies planning to invest not in replacing old equipment but in expanding their activities has significantly increased — 40%, which again exceeds the average figure in the EU.
Finance Minister Arvils Ašeradens (New Unity) did not hide his pleasant surprise:
"A surprisingly strong investment optimism. This is very important. Our economy has entered stagnation, which could be explained by geopolitical events. Now we see that companies somehow still believe in the policies of Latvia, the European Union, and NATO. That we will be protected. Companies are starting to believe in this market and its growth."
However, this does not mean that one can fold their arms and wait. Companies also pointed out a number of factors that still hinder investments. Among them are insufficient workforce skills, high energy prices, and the bureaucracy that has already been mentioned several times this year.
Foreign investors are making similar conclusions, adding that uncertainty remains high.
"The investment environment is becoming more attractive. It has improved compared to previous years, but we still see this uncertainty. As a result, there is an effect that the country looks promising for future foreign investments, but they are not happening yet," noted Reinhard Schneider, chairman of the Foreign Investors' Council.
To a lesser extent, but Latvian companies also talk about the availability of financing. Many use their own funds for growth, however, about half still turn to banks and express complaints about the high cost of loans.
This has been discussed a lot by representatives of supervisory institutions. The head of the research department of the Bank of Latvia, Karlis Vilerts, noted in the podcast "Piķis un Ģēvelis!" of the tv3.lv portal that this has been particularly problematic in recent years.
"Not long ago, we were in an absurd situation: we have very good credit quality indicators, the financial situation of companies improves year by year, and the level of household debt is the lowest in the eurozone. Everything is fine, but we still have the highest interest rates, and companies are required to provide collateral worth twice the amount of the loan. I don’t want to use the word 'pawnshop', but essentially they give less than they take," Vilerts noted.
The Bank of Latvia emphasizes that there has now been a turning point in lending, and this sector has begun to grow rapidly.
