Tomorrow will be better: a third of Baltic SMEs plan to expand in 2022

According to Luminor survey, small and medium-sized enterprises (SMEs) in the Baltics believe that the worst part of the coronavirus pandemic is over – more than a third of companies surveyed in Lithuania and Latvia, and more than a half in Estonia have a positive view of 2021, compared to 2020. One-third of SMEs in Lithuania, Latvia and Estonia plan to expand their business next year. A positive outlook is also visible in companies' financial results – more than 50% of SMEs have managed to maintain or increase their turnover during 2021.

The most optimistic are Estonian SMEs – 52% of respondents in Estonia states that this year was positive, compared to 2020. Meanwhile, the opinion of Lithuanian and Latvian companies is a bit more restrained – positively 2021, compared to 2020, rates 38% Lithuanian and 43% Latvian respondents. About a third of respondents in the Baltic States say that the situation this year is similar to 2020. Meanwhile, negatively this year estimated about 20% of Lithuanian, 16% Latvian, and 11% Estonian business representatives.

"The first year of the pandemic was harder for SMEs than the second one – quarantine restrictions changed consumer behavior, so during 2020 companies needed to act fast and adapt to it. According to the Luminor survey organized in 2020, more than half of the Baltic states' companies turnover decreased, compared to 2019. This year survey shows the opposite trend – more companies have either maintained the same turnover level or even grown it, which shows that small and medium-sized enterprises have already adapted to the conditions of the pandemic and the shock state, that prevailed at the beginning of pandemic, ended,“ said Luminor Bank's corporate customer department manager Vytis Žegužauskas.

This year, compared to 2020, one-fifth of the survey respondents managed to increase the turnover ( 23% Lithuanian and Estonian, and 18% Latvian SMEs). The same level of turnover as last year was maintained by 30% of companies in Lithuania and Estonia, 34% of SMEs surveyed in Latvia. Meanwhile, about 37% Latvian, 34% Lithuanian, and 31% Estonian businesses state that their companies‘ turnover has dropped.

​"This period is unusual, therefore the results of the survey are ambiguous. On the one hand, we see that fears about the impact of the pandemic on SMEs are diminishing – more than half of them indicated that even if the restrictions related to COVID-19 management in the Baltic States continued or were tightened, this would not affect the sustainability of their operations. However, those companies that do not intend to expand their activities in the coming year indicate that one of the main reasons for this is the unpredictability of the impact of the pandemic and other global events on their activities,” said V. Žegužauskas.

The survey revealed that more than a third of Baltic companies plan to expand their business in 2022 (38% in Lithuania, 34% in Latvia, and 32% in Estonia). Representatives of Lithuanian and Estonian SMEs plan to expand their business mostly by increasing companies‘ sales and Latvian entrepreneurs are willing to develop new services or products next year. To increase export in 2022 plans about 18% Lithuanian, 29% Latvian, and 22% Estonian SMEs.

The main reason not to expand business in 2022, according to one-third Lithuanian and Estonian, and a half of Latvian companies is unpredictability caused by the pandemic and other global events. Lithuanian companies also point to the lack of additional investments for business development.

Luminor survey was conducted in September 2021 in collaboration with market research firm Norstat. The survey participants – 750 Baltic SMEs managers and department heads.