Coface Baltics risk management company reports on its subsidiary’s annual study of the economic situation in Central and Eastern European (CAE) region. 40 Baltic businesses are included in the Top 500 rating: five from Latvia, 13 from Estonia and 22 from Lithuania.
This year marks 15 years since the start of the annual Top 500 rating prepared by the global risk management company. Companies included on the list are analysed based on turnover, profits and other additional factors – number of employees, sector, market and credit rating. This is why CAE Top 500 rating serves as a representative index for market trends in the entire region.
Latvia’s biggest company on the list is the state-owned Latvenergo JSC (167th). This company has risen by 58 positions on the list when compared to the situation a year prior.
The company’s turnover went up by 73% and profits by 157%.
The list also includes Elgo Groupa JSC (218th), Orlen Latvija LLC (296th), as well as two retail companies – Rimi Latvija LLC (317th) and Maxima Latvija LLC (338th).
Five companies from Latvia turned over EUR 6.354 billion and gained profits worth EUR 286 million last year. On top of that, these companies employed 16,400 people last year, which was 1.8% of the entire labour force in Latvia.
Compared to the situation a year prior, the number of Latvian companies on the list is down by one, while the number of Estonian companies is up from 5 to 13.
The number of Lithuanian companies remains unchanged.
“Last year, Baltic companies had to adapt to changes in the inflation environment, which Europe hadn’t experienced for many years. The war was not the only reason, and the situation was also affected by low interest rates in previous years, a large volume of money that flooded the market by central banks,” Coface Baltics manager Mindaugas Sventickas describes the main challenges in the business environment in Baltic States.
He explains in more detail: “The war became a catalyst that made the inflation level considerably higher and less possible to control than previously expected. In turn, the aforementioned amount of additional money in the market even at extremely high inflation rates did not cause the merchants cash flow problems due to the emergence of a liquidity reserve in the market. The same can be said about the consumption level: record savings helped absorb the inflation shock without significant consumption changed. However, the growth of everyday expenses forced reviewing priorities for consumers and businesses, and all this had a significant effect on domestic and global consumption”.
Retail trade companies experienced significant changes in turnover and profit indexes in Baltic States, as their positions went down significantly.
“The aforementioned are also the reason why retail trade companies’ business results experienced changes in consumers’ behaviour last year – the suddenly increased costs due to a drop in purchasing power could not be compensated by adequately increased prices. At the same time, the companies in which consumers have less bargaining power or the ability to suddenly change consumption habits, ended the year with significantly stronger results,” said Sventickas.
Poland is in the lead in Coface’s CAE Top 500 list – 166 companies of the country are on this list. In total these companies turned over EUR 413.166 billion in 2022. This country has been in leading positions in Top 500 annual lists for several years. Although Poland can be proud of its large population, it is worth mentioning that when compared to the year prior, the turnover of its largest companies went up considerably – by 37.9%.
Coface economists stress that, despite initial concerns about the influence of the Russian war in Ukraie on CAE economies, the region has managed to demonstrate surprising resistance, despite a slight decline caused by the energy crisis and growing costs. Looking at the situation in the region in general, the most successful sectors in CAE include the oil and gas sectors, public utilities, as well as automotive industry and transport sector.
Coface experts say that the main risks in CAE region this year are related to the situation in Western Europe, as well as corporate liquidity problems.
“CAE countries have managed to preserve their active exporters role, mostly in the direction of Western Europe, as well as expand their exports towards more far-away destinations. But the main risk for 2023 is the complicated foreign economic environment in Western Europe, especially Germany, which may also affect the CEE countries due to weak economic activity and weak global trade. Despite this, however, a gradual recover is expected in the coming quarters. While household consumption has been affected by inflation and higher interest rates, it is expected to gradually support growth as inflation progresses and the labour market remain strong,” explains Sventickas. (BNN/Business World Magazine)
