Investments – rays of hope, but still insufficient
• Sufficient reasons and means for higher investments
• Investment growth recovered despite weak expectations
• Uncertainty regarding growth remains
Sufficient reasons and means for higher investments
Investment in Lithuania not only significantly lags behind pre-crisis levels, but is also well below investment in Latvia and Estonia. Underinvestment and lagging productivity growth in open sectors are a cause for concern – competitiveness may start eroding. As wage growth started outpacing productivity, Lithuanian export markets’ shares started decreasing. Companies will need to invest more in efficiency and capacity in order to remain competitive and expand--or even retain--their market shares. Companies enjoy high retained earnings, low leverage, and favorable lending conditions; therefore, financing investments should not be a problem.
Investment growth recovered despite weak expectations
Somewhat unexpectedly, investments grew rapidly in the first half of this year despite still-weak expectations. More important, companies have been increasing their investments in efficiency. The most rapid investment growth has been in domestic demand-dependent sectors. We have also seen strong investment growth in intangible fixed assets and residential buildings.
Uncertainty regarding growth remains
Industrial and service confidence is higher than a year ago, but demand remains a concern. However, risks to the global outlook have increased, and turbulence in the financial markets, bad news from emerging markets, and the deepening recession in Russia might affect confidence in many sectors. Even though companies have sufficient reasons and the necessary means to invest, companies are likely to be wary when it comes to increasing financial leverage and embarking on riskier long-term projects.
For more information about this report, please contact Ms. Vaiva Šečkutė, +370 5 258 2156, Vaiva.Seckute@swedbank.lt
This email is sent through the Research Department’s web-based distribution system. As a subscriber you can change your settings regarding what publications you will receive by clicking “Change your settings” you can also unsubscribe by clicking "Unsubscribe".