Investors’ Confidence Index for Lithuania (ICIL) for the first time in the history of this study reached a negative value in the last quarter. The index rose again in this quarter and currently ICIL’s final value is 1,064 out of 2. Although the growth of the index and the return to a positive value indicate a higher positivity of investors, confidence is still low when compared to the period before the quarantine.
The result of the last quarter naturally responded to the situation in the country – a lot of uncertainty about the economic situation, the further course of the crisis caused by the pandemic and its consequences for business. Investors were most hesitant in assessing the opportunities and changes in their own companies. Business representatives are more positive in assessing this area in this quarter and it is one of the main reasons why the value of the index has increased. It is worth mentioning that the survey was conducted in September and October, before the second wave of the pandemic in the country. More business leaders believe that the situation in companies will remain stable, but not worse. Company’s profit and opportunities to invest, as well as the growth of the number of employees and their salaries are assessed more positively by investors in Lithuania. 78 percent of surveyed business representatives thought that the company’s profit will decline but now investors are more optimistic – the number of those who thought so, fell to 12 percent. The situation has also improved when assessing the possibility of changes in employees’ salaries – none of the respondents anticipates a decrease in salaries in the fourth quarter, when 18 percent of them discussed it four months ago. It is important to note that while fewer negative changes are expected, investors are still cautious about expectations, most of them tend to believe that the situation will remain unchanged.
The valuation of the areas, which are important for the investment climate has also changed, compared to the previous quarter. A survey was conducted during the election period and showed that the stability of the political environment remains one of the areas that worries investors the most. The opinion that it is high was expressed by 12 percent. p. fewer investors. Business leaders were slightly more positive about the macroeconomic environment in this quarter and fewer respondent said that it will get worse in the near future (23 percent; 49 percent thought so in the second quarter). Investors are also more positive about the credit options in the near future. Investors remain consistent when asked about telecommunications, transport and logistics infrastructure and the foreign language skills of the employees. These areas were marked as the strongest advantages of current business environment in Lithuania.
The ICIL study shows that the Government should pay more attention to the efficiency of the public sector, talent migration and education system. Education remains at the top of the list of the priorities – 7 out of 10 investors surveyed identify this area as the most important. The assessment of the current situation and expectations are also reflected in other similar studies. The Indicator of Economic Assessments, which measures the confidence of the main economic participants – producers and consumers in the Lithuanian economy, is growing, although the growth is slower compared to previous months. This indicator increased by 2 percentage points in September (compared with August). However, compared to September 2019, the rate of economic assessments is 12 percentage p. lower.
Investors were also asked to evaluate Government’s work in improving the investment and business climate in the country. Also, they provided their insights into the effectiveness of the work of the Parliament and ministries. The evaluation of the majority of ministries slightly changed. The Ministry of Agriculture, also the Ministry of Communications and the Ministry of Interior experienced the biggest negative change. The Ministry of Foreign Affairs remains the best-rated institution. Government’s work in improving the investment and business climate in the country was rated as average (4.8 out of 10). Although investors are more positive and have more positive expectations in many areas, it is important to note that this is only a small positive change compared to the pre-quarantine period. Respondents still express many doubts and expect stability, also they have less ambitious plans for their companies.
Read the full report here.
Contact: Monika Gabalytė, Investors’ forum
[email protected] +370 5 2755258