The most subdued forecasts were expressed by Lithuanian business leaders, with only 42% of company CEOs believing that the global economy will accelerate in 2022.
In the Baltics, Lithuanian company CEOs are the most positive about the government’s actions in the spheres of (1) national defence, (2) ensuring the stability of the financial sector and the availability of borrowed capital, and (3) providing support to businesses to deal with the pandemic.
In 2022, 64% of Lithuanian CEOs expect more government attention to the competitiveness of the tax environment, 61% – to the relevance of the education system to changes in the economic environment, 59% – to the openness of the labour market to professionals from third countries.
More than 50% of Lithuanian business leaders say their companies have already made or are planning to make commitments to reduce climate change.
In 2021, the search and recruitment of professionals have become extremely challenging in the Baltic States, and in Lithuania, it has become the most challenging in the last few years, on a par with the labour market situation in 2019.
Lithuanian business leaders are the most positive among Baltic CEOs about the government’s response to the Covid-19 crisis.
With worldwide optimism among Chief Executive Officers (CEOs) about economic growth at record highs, the outlook for the global economy varies across countries and territories.
As many as 77% of CEOs predict that global economic growth will accelerate in 2022 – a record high since PwC launched its annual Global CEO Survey in 2012. In the Baltic CEO Survey 2022, Lithuanian CEOs expressed the most subdued forecasts for global economic growth, with 42% of respondents believing that the world economy will accelerate. The same percentage, 42%, expects economic growth to remain unchanged. Those who think economic growth will slow down have fallen from 44% in 2020 and 19% in 2021 to 16% this year.
Latvian CEOs are more subdued about global economic growth this year than last year, but are more optimistic than the representatives of Lithuanian business: those who think the economy will accelerate fell by three percentage points to 50%, while those who expect the economy to stay at the same level increased from 27% to 32%. Estonian CEOs are the most positive about the global economy in the Baltics, with 64% forecasting economic growth – up 8% in 2021.
Similar reservations on the part of Lithuanian, Latvian and Estonian CEOs are also reflected in their assessments of the growth of their own economies, although the outlook is slightly more positive than for the global economy. Lithuanian CEOs express the most moderate views about their country’s economic growth: 45% of them believe that the Lithuanian economy will grow while 39% expect the situation to remain unchanged. Meanwhile, 50% of CEOs in Latvia and 62% in Estonia expect their economies to grow. 31% of CEOs in Latvia and just 20% in Estonia believe that economic growth in their countries will remain the same.
Rimvydas Jogėla, Country Managing Partner at PwC Lithuania, comments:
„The level of optimism about economic growth varies across countries and regions of the world, as there is no shortage of challenges for business leaders to overcome. The more subdued forecasts were also shared by Lithuanian and Baltic CEOs, probably due to the increasing issues caused by inflation, supply chain disruptions, rising energy prices and the geopolitical situation.“
How Lithuanian CEOs assess government actions
In assessing the actions of the Lithuanian government in 2021, the achievement of the goals set for the national defence and security received the most positive assessment by Lithuanian CEOs – the view is shared by 60% of the CEOs, compared to 59% in the previous survey. Less than half, i.e. 49%, of the CEOs surveyed were positive about the stability of the financial sector and the availability of borrowed capital; that’s 10% more than in the previous survey (39%). 41% of the CEOs say that government actions in the financial sector have been moderately effective. The implementation of business support to mitigate the effects of the pandemic was rated as rather or highly effective by an increased number of Lithuanian CEOs – 49% compared to 27% last year. 31% of respondents rate the government’s work in this area as moderately successful (compared to 36% in the previous survey) and 20% – as rather/highly ineffective (compared to 37% in the previous survey).
Efforts towards the reduction of public administration costs received the lowest rating from Lithuanian CEOs, with 63% saying that actions in this area have been rather/completely ineffective. More than half, 56% compared to 46% last year, of business representatives believe that the Lithuanian labour market is still not sufficiently open to professionals from third countries and therefore consider the government’s work in this area to be completely/rather inefficient. The number of CEOs who rate the education system’s responsiveness to the economic environment as unsuccessful dropped from 70% in the previous survey to 55% this year.
The Lithuanian government’s efforts to achieve its customs policy objectives, improve the competitiveness of the tax environment, protect the environment, implement major national infrastructure projects and improve the overall business environment in the country received a moderate rating.
Areas where the government should give priority in 2022
According to Lithuanian CEOs, in 2022, the national government should focus mostly on improving the competitiveness of the tax environment (64% of CEOs), the responsiveness of the education system to changes in the economic environment (61% of CEOs) and the openness of the labour market to professionals from third countries (59% of CEOs). Compared to last year, improving the business environment has moved from the first to the fourth priority (56% of CEOs this year vs. 47% of CEOs last year).
Balancing customs policy, business support to mitigate the effects of the pandemic and the implementation of major national infrastructure projects are perceived to be the least prioritised areas for 2022 (8%, 10% and 17% of CEOs respectively).
In Latvia, improving the competitiveness of the tax environment and the business environment have remained high on the agenda for two consecutive years. Meanwhile, CEOs believe that customs policy, the implementation of major national infrastructure projects and nature protection should receive the least attention from the government, as is also the case in Lithuania. The opinion shared by Estonian CEOs is similar to that of their Lithuanian counterparts – in 2022, the focus is expected to be on promoting the openness of the labour market to professionals from third countries, adapting the education system to changes in the economic environment and the competitiveness of the tax environment.
More than 50% of Lithuanian companies have made or intend to make commitments to reduce climate change
In Lithuania, the percentage of companies that have already made commitments to reduce pollution is still the lowest compared to the prevailing trend in the world, Western and Central and Eastern Europe and the Baltics. Only 17% of Lithuanian CEOs say that their companies have already committed to carbon-neutral and 9% – to net-zero commitments. However, another 34% of Lithuanian CEOs say that their companies are already working towards carbon neutral commitments and 33% – towards net-zero commitments.
Among the three Baltic countries, Estonia has the highest number of CEOs whose companies have already made commitments to reduce climate change: 25% have committed to carbon neutrality, 17% – to net-zero greenhouse gas emissions.
Ronaldas Kubilius, Senior Project Manager for ESG services at PwC Lithuania, says: „The survey results confirm what we see in practice – the issues and commitments towards sustainability and reduction of greenhouse gas (GHG) emissions are on the agenda of many Lithuanian CEOs. Given that this is still a relatively new trend, the number of companies that have made big progress is low, and some managers are still hesitant to take concrete further steps, assessing their impact or not seeing an immediate return on the sustainability commitments. The priorities of some of the managers are also influenced by the fact that emission reduction targets are still more common in long-term corporate strategies than in the targets set for the managers directly by shareholders.“
Recruitment and hiring in the Baltics remains challenging
As labour market trends change, Baltic CEOs say that in 2021, finding and hiring professionals in their business sectors has become much more challenging.
According to Lithuanian CEOs, the current labour market situation is the most challenging in the last four years and is on par with labour market trends in 2019. This position was shared by 89% of CEOs – 42% more than last year and a record-high percentage of respondents since 2019.
Compared to Lithuania, Estonian and Latvian CEOs are less concerned about the increased challenges in recruitment and hiring – 75% of CEOs in Estonia (45% more than last year) and 67% in Latvia (28% more than last year). In Estonia, as in Lithuania, the current indicator is in line with the results of the 2019 survey, while in Latvia the situation is more in line with the market trends in 2020.
Covid-19 crisis management actions most positively viewed by Lithuanian CEOs
This year’s survey asked Baltic CEOs how they view the government’s response to the Covid-19 crisis in 2021.
58% of Lithuanian CEOs believe that vaccination has been implemented highly/rather effectively in the country; 36% say that vaccination has been moderately successful. Estonian CEOs are the least positive about the effectiveness of the vaccination, with only 22% of respondents believing that the vaccination has been a success.
Lithuanian CEOs were the most optimistic in the Baltics in their assessment of the measures to contain the outbreak of the pandemic, their timely application and communication to the public. Almost half (49%) of the CEOs surveyed in Lithuania believe that the government used appropriate measures to control the outbreak of the pandemic, while 31% believe that the measures chosen were moderately effective. 39% of the CEOs say the timing of the measures has been appropriate/moderately appropriate. Also, 39% of the CEOs believe that the Lithuanian government’s communication to the public about the measures taken to manage the pandemic crisis was moderately successful. A similar number of respondents (34%) rate the communication of the measures as rather unsuccessful.
Just over half of the CEOs (51%) said that business support in Lithuania in 2021 was highly or rather effective. Compared to Latvia and Estonia, the assessment of this issue by Lithuanian CEOs is the most favourable to the government, with only 17% of the CEOs in Latvia and 15% in Estonia rating business support as highly or rather effective.
Meanwhile, only 25% of the survey participants rated support to the Lithuanian healthcare sector as highly/rather effective. The majority of the CEOs (54%) consider the support to be moderately effective, while 18% consider it to be completely ineffective or rather ineffective. As many as 61% of the respondents said that efforts to ensure the quality of education in Lithuania have been moderately successful and 25% said they were rather/completely unsuccessful.
