Baltic CEO Survey 2016


Unsettled business environment is the top concern of Latvian CEOs.

Riga: Every year PwC’s Global CEO Survey explores how global trends affect CEOs worldwide. This year, to highlight a comparison of business environments across the Baltic States, PwC interviewed CEOs in Latvia, Lithuania and Estonia separately about their growth prospects, competition, partnering with government, and the tax system.

Zlata Elksnina-Zascirinska, chair of the board of PricewaterhouseCoopers SIA, says that the survey results show up commonalities and differences: “Baltic CEOs share external challenges such as skilled labour shortages and geopolitical uncertainty, but Latvian CEOs are considerably more worried about the unsettled business environment in Latvia, while Estonian and Lithuanian CEOs are more concerned about competition, changes in consumer behaviour, and other business factors. The survey also showed up a number of good things, such as the willingness of Latvian CEOs to partner, particularly with government agencies, in an effort to improve the local business environment.”

Growth forecasts

Baltic CEOs agree that global economic growth will not change considerably over the coming year. 66% of Latvian CEOs are moderately confident about Latvia’s economic stability and expect little or no improvement over the coming year.

Baltic CEOs take different views of their revenue growth prospects. Lithuanian and Estonian CEOs are comparatively optimistic in the medium term, with 84% confident about revenue growth, while Latvian CEOs are slightly more cautious, with 76% expecting revenue growth over the next three years.

To continue their business development, 75% of Latvian CEOs expect to continue natural growth and cut costs (41%) over the next 12 months. A considerably smaller percentage (26%) of respondents expect to partner with other companies, including startups.

In terms of key strategic markets, Latvian CEOs named Lithuania, Estonia and Russia, while Estonian CEOs mentioned Finland, Sweden and Latvia. Lithuanian CEOs recognised Scandinavian countries, Baltic States and Germany as equally important.

Competition and competitiveness

93% of Latvian CEOs say that competition in their industry will grow over the next three years and that attracting new customers, recruiting top talent, creating innovative solutions, implementing and integrating new technology with existing systems are all very important for staying competitive.

To be better prepared for future challenges and to stay competitive, CEOs focus on customer retention and existing markets. As they recruit top talent and invest in new technology, CEOs say that conquering new markets and investing more to boost capacity as well as innovation and R&D are on their to-do list.

In terms of partnering with stakeholders, most Latvian CEOs prefer to partner with business associations, customers and suppliers, with only 40% considering partnership with competitors, startups and government. They would do this mostly for the purpose of accessing new customers and technology, with risk sharing and accessing new industries mentioned least frequently as reasons for partnering.

Risks and threats to business growth

Baltic CEOs share concerns about over-regulation, the increasing tax burden, and geopolitical uncertainty, with varying levels of intensity and emphasis in each country. Latvian CEOs are most concerned about the increasing tax burden (85%), Estonian CEOs’ top concern is uncertain economic growth (71%), and Lithuanian CEOs rank other countries’ protectionism first and foremost (64%).

In terms of business threats, Baltic CEOs share only concerns about having a skilled workforce; Latvian CEOs are significantly concerned about bribery and corruption (75%) and the lack of trust in business (56%), Estonian CEOs worry about their ability to respond to a crisis (63%) and about changes in consumer behaviour (61%), while Lithuanian CEOs mentioned new market entrants (88%) and supply chain disruptions (74%).

Partnering with government and assessing the tax system

The top three priorities of Baltic CEOs are building an internationally competitive tax system, having a skilled and adaptable workforce, and creating an environment that drives innovation. The same list of priorities was reported in Lithuania: 64%, 47% and 34% respectively. However, if we look at the results of each national survey and compare it with 2014, Latvia has significant differences. The top three priorities of Latvian CEOs are building an internationally competitive tax system (87%), fighting the shadow economy (66%), and having a skilled and adaptable workforce (52%), while in 2014 these were mainly a skilled and adaptable workforce (82%), an internationally competitive tax system (68%), and the health and welfare of workers (35%). For Estonian CEOs this is first of all an innovative environment that drives business growth (70%), a skilled and adaptable workforce (62%), and an internationally competitive tax system (49%).

Asked to evaluate how the government has performed on various fronts, Latvian CEOs have a comparatively high opinion of government efforts in maintaining an appropriate digital infrastructure (44%), with the lowest scores given to fighting the shadow economy (93%) and building an internationally competitive tax system (86%).

When it comes to assessing the tax system, 85% of Latvian respondents said that easing the administrative burden of tax compliance is as important as lowering the tax rates, while 68% said that stability of the tax system is more important than tax rate reductions. More than two-thirds (73%) of Latvian CEOs are willing to provide the tax authorities with more details of their company if only that might help cut back the shadow economy.

The advantages of technology in improving operational efficiency

Latvian CEOs named data mining and analytics (90%) and cybersecurity (77%) as their key strategic technologies. Compared with the 2014 survey, the significance of data analytics and computerised facilities has increased, while cybersecurity has slightly dropped (91% of Latvian respondents cited it as strategically important in 2014).

Among key benefits from using technology, Latvian CEOs cited efficiency improvements and the use of data analytics in business processes. These were recognised as valuable assets by 76% and 61% of respondents respectively.

Headcount to rise in Latvia and across the Baltics

Along with economic growth and revenue prospects, CEOs were asked to reveal their staffing plans for this year. Despite their cautious view of revenue prospects, many Latvian and Baltic CEOs are determined to increase headcount. 45% of Latvian respondents expect to recruit more people, and 62% expect to increase salaries over the next 12 months.

Our approach

PwC’s Baltic CEO Survey involved interviewing 123 respondents from Latvia, 93 from Estonia and 105 from Lithuania in October and November 2016. The majority of respondents are Latvian Top 500 companies. The survey covered companies operating in major Latvian industries: retail and wholesale, banking and finance, construction, processing, IT and telecommunications, health, transport, and other industries. The respondents included CEOs of privately owned and state‑owned companies. The survey questions were answered by directors and board members of large and medium companies. The interviewing was done in cooperation with the newspaper Dienas Bizness.

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Kalvis Gavars

Kalvis Gavars

PwC Marketing and Communications Manager, PwC Latvia

Tel: +371 67094400

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