The new edition of the FICIL (Foreign Investors’ Council in Latvia) Sentiment Index research reveals commitment of the foreign investors to continue doing business in the Baltics (Estonia, Latvia, Lithuania), despite geopolitical uncertainty. Moreover, around 50% of respondents/foreign investors in Latvia and Estonia plan to increase investments in the Baltics, while this estimate is slightly lower for respondents in Lithuania (38%). What is the reason behind such commitment and business optimism? Remarkable resilience that the Baltic States have demonstrated across years, as well as, several advantages of the local investment climate.
In view of the foreign investors that operate in the Baltics, the three countries have learned to maintain economic and political stability, despite being small in size and susceptible to external shocks, such as geopolitical tensions, Russian trade sanctions, energy price spikes and COVID-19 pandemics. The recipe of the Baltics’ resilience includes solid democratic systems, sound macroeconomic management, open and flexible trade policies, close dialogue between the policymakers and investors, high adaptability, quiet, yet quick, learning from more advanced European neighbours. In addition, the foreign investors point to common strengths of the Baltic States, such as excellent digital infrastructure, proximity to large markets and high quality of life, yet highlighting specific advantages for doing business in each country.
The economic resilience of the Baltics is also reflected in the recent growth forecasts, where GDP growth of Lithuania is expected to reach 3%[1] in 2025, 2.1% in 2026 in Latvia[2], and 2.6% in 2026 in Estonia[3]. In contrast to the foreign investors that already operate in the Baltics, the potential investors are more sceptical about the growth prospects of Estonia, Latvia, and Lithuania, due to geopolitical concerns. Although current investors admit that these concerns might affect the perception of security, they argue that geopolitics is only one factor that impacts the investment climate. Such response reflects a positive change in investor sentiment, compared to the previous year.
Given that the Baltics, at times, are too cautious and modest about their achievements, especially Latvia, the central question is whether the Baltics will succeed in turning a challenge (geopolitical risk management) into an opportunity, in transforming a risk into resilience, thereby capitalising on increasing investments in the defence sector? Although it is too early to give a definite answer, there are positive signs that the Baltics might succeed in this:
- Energy Independence: In 2025, the Baltics achieved a major milestone by synchronizing their electricity grids with the rest of Continental Europe, formally ending reliance on the Russian-controlled BRELL system. This step, alongside large investments in renewable energy and grid upgrades, has positioned the Baltics at the forefront of Europe’s green transition.
- Defence and Industry: Latvia, for instance, has begun full-cycle domestic production of the Patria 6×6 armoured vehicle[4]. This move not only strengthens Latvia’s national defence, but also builds industrial capabilities that support broader economic resilience. In Lithuania and Estonia, defence investments are also increasingly tied to long-term development strategies rather than short-term fixes, exemplifying a model of resilience that the Baltics are steadily advancing.
- Digital Transformation: The Baltics are committed to digital resilience and innovation, as it has given rise to strong clusters in fintech, cybersecurity, and artificial intelligence sectors. Estonia’s leadership in e-governance is well known[5] – today, virtually every government service can be accessed online. Similarly, in Latvia, over 90% of public services are available online, and more than three-quarters of the population regularly uses e-government platforms. Lithuania, in turn, now hosts one of Europe’s largest fintech ecosystems, with over 260 licensed fintech companies operating as of 2024.
Resilience, optimism and bold ambitions of the Baltics are, perhaps, best captured by Ieva Jāgere, Director General at Investment and Development Agency of Latvia: “Latvia has always punched above its weight when it comes to turning complexity into opportunity. Despite recent geopolitical headwinds, we are entering a new phase of targeted, high-value investment — especially in sectors like smart energy, photonics and smart materials, AI, defence technology, and digital services. With over 90% of public services now available online and a growing pool of skilled talent, Latvia offers a uniquely agile environment for innovation-driven businesses. Our focus is clear: to attract investment that not only brings capital, but also builds capacity.”
Despite demonstrated resilience of the Baltics, the research points to critical challenges that need to be addressed in each country to ensure continuous attractiveness of Estonia, Latvia, Lithuania for the foreign investors. The key strengths, challenges, collaboration opportunities in the Baltic States, as well as, European and international support to the Baltics will be discussed during the upcoming event “Beyond Borders: Investment & Security in the Baltics”, which will take place in Riga on 26 May. For more information, please go to the FICIL website.
About the Sentiment Index research:
This year, FICIL, in collaboration with FICE (Foreign Investors Council in Estonia), SSE (Stockholm School of Economics in Riga), and with the support of LIAA (Investment and Development Agency of Latvia), have conducted research on investment climate in the three Baltic States. In view of joint geopolitical challenges that have been decreasing attractiveness of the three Baltic States for investors, the current research aimed to explore their impact and compare investment climates in Latvia, Estonia, and Lithuania. In total, 118 foreign companies participated in the current research across the three Baltic States.
[1]https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/lithuania/economic-forecast-lithuania_en
[2]https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/latvia/economic-forecast-latvia_en
[3]https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/estonia/economic-forecast-estonia_en
[4]https://www.patriagroup.com/newsroom/news/2024/patria-to-provide-56-additional-armoured-command-and-control-vehicles-for-latvia
[5] https://e-estonia.com/estonia-100-digital-government-services/