Future trends in the Baltic Sea Region

Elina Priedulena, Hanse Parlament

Part-financed by the European Union (European Regional Development Fund and European Neighbourhood and Partnership Instrument)

Contents

1. Economic development in Baltic Sea Region (BSR)

- general development trends

- SMEs

2. Trading across borders

3. Innovation

4. Demographic changes

5. Economic Outlook for Lithuania

2

Is it worth to operate abroad?

• Large companies have been global for a long time – globalization/internationalization

• SMEs are usually acting on markets

close to home

→ Next step: expand further to other markets, understanding the vast opportunities but also the risks, in large consumer markets like Poland, Russia and Ukraine, because: → more opportunities, even though more competitiveness; more profit for own enterprises

3

Economic development

of BSR

4

BSR

5

Source: HWWI

States of BSR – a vast potential of EU

• 147 million inhabitants = 29% of the population of the EU

• 67 millionen employees (2009) = 31 % of all employees in EU

• 30 % of the GDP of the EU Member States

• export 725 mrd./euro = 33% of exports within EU (2009)

• import 993 mrd./euro = 30% of EU imports (2009)

• more than 100 universities and research institutes

Furthermore

• favourable geographical location regional cooperation in manifold

manner

• EU recognised the potential of BSR and developed the EU Strategy 2020

for the BSR – first specific regional strategy in EU to support and coordinate

collaboration of diverse players on various levels.

Source: HWWI

6

Real GDP growth rate,

percentage change on previous year

7

Source: Eurostat

Real GDP development and forecast

8

2009 2010 2011 2012f 2013f

Denmark -5.8 1.3 1.2 1.4 1.7

Germany -5.1 3.7 3.0 0.8 1.5

Estonia -14.3 2.3 8.0 3.2 4.0

Latvia -17.7 -0.3 4.5 2.5 4.0

Lithuania -14.8 1.4 5.9 2.3 3.8

Poland 1.6 3.9 4.0 2.5 2.8

Finland -8.2 3.6 2.8 0.4 1.8

Sweden -5.2 5.6 4.0 1.4 2.1

Norway -1.7 0.7 2.4 2.7 2.9

• percentage change on previous year

• f=forecast Source: Eurostat

0

50

100

150

200

250

2004 2005 2006 2007 2008 2009 2010

Ind

ex v

alu

e

EU 27

Denmark

Germany

Estonia

Latvia

Lithuania

Poland

Finland

Sweden

Norway

9

GDP per Capita in PPS (EU=100)

Source: Eurostat

Small and medium-sized enterprises (SMEs)

10

SMEs – backbone of the European economy

• enterprises (EU, 2010)

– SME: 99.8% of all enterprises (20.8 Mio.)

• Typical SMEs (92% of all SMEs): micro enterprises

< 10 headcount

• Ø 4 employees/enterprise

– large enterprises: 0.2% of all enterprises (43,000)

• share of employment (EU, 2010)

SMEs EU 27: 66.9% of all employees

85% of net new jobs in the EU between 2002 and 2010 were

created by SMEs

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Trading across borders

12

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Trading within BSR

The exchange of goods is essential for the cross-border

integration of EU states; Baltic Sea states important trading

partners

international trade through spatial proximity between regions

more intense

→ neighbours within BSR have intense import and export

trading relationships with each other

the traditional economic interconnections between former

Hanseatic cities

Source: HWWI

Major export and import countries of Lithuania 2011

Imports Exports

78159.9 LTL/milj. 69642.5 LTL/mlj.

EU 55.9% 61.4%

Russia 32.8% 16.6%

Germany 9.7% 10.2%

Poland 9.1% 9.3%

Latvia 6.6% 6.9%

Netherlands 4.9% 6.6%

Sweden 3.3% 6.1%

Italy 3.2% 5.2%

Beldium 3.21% 4.1%

Estonia 2.8% 4.1%

Belarus 2.5% 3.6%

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Source: Statistics Lithuania

Corner stones of export and import

Export

Import

15

25%

9%

10%

8%

48%

mineral products

chemical industry products

machinery; mechanicalappliances; electricalequipment

vehicles; aircraft;vessels&associatedtransport equipment

other

35%

11%

12%

8%

34%

mineral products

chemical industryproducts

machinery; mechanicalappliances; electricalequipment

vehicles; aircraft;vessels&associatedtransport equipment

other

Innovation

16

Indicators of Innovation

17

Innovation

European

Scoreboard₁

GDP share

of R&D₂

expenditures

Share of R&D

employees at

labour forces

Patents per

100.000

inhabitants

Labour force

share of

HRST₃

2009 2008 2007 2007 2009

Rating %

EU 27 - 1.9 1.5 11.7 42.1

Sweden 2 3.8 2.4 29.8 51.2

Finland 3 3.7 3.0 25.1 52.5

Germany 4 2.6 1.7 29.1 47.5

Denmark 6 2.7 2.4 19.4 53.0

Estonia 13 1.3 1.4 1.7 49.2

Poland 26 0.6 0.7 0.4 36.4

Lithuania 27 0.8 1.2 0.2 45.3

Latvia 30 0.6 0.9 0.8 43.3

Russia - 1.0 1.1 (2005) 0.2 -

1) 33 countries by comparison

2) R&D – Research and Development

3) HRST – Human Resources in Science and Technology

Sources: Eurostat (2010); HWWI

Innovation and SMEs

• fundamental, especially in crisis times, for stimulating

the expansion of SMEs, either into existing or new

markets

• compared with large enterprises rather difficult:

finance, technology, shortage of qualified personnel,

limited resources

• Policy responses to those challenges:

Reaching equal big share of GDP into R&D is one

of strategic goal of the EU Strategy 2020. 18

Demographic changes

19

Demography

• employment resources is the key factor of economic

development in BSR

• Demografic changes due to:

continued increase of life expectancy

natural population development – averaged EU wide

low rates of fertility

Migration – increased migration from low earn

countries to EU 15

20

Effects: aging of society, lack of employment, growing average age of

population, structural issues/changes regarding employment, problems in

social spheres – safeguarding of social pension system, etc. 21

Economic Outlook

for Lithuania

22

23 So

urc

e: L

ietu

vo

s B

an

ka

s

Economic outlook

• The country’s economy is slowing amid the eurozone

debt crisis

• Nevertheless,

→ the global outlook brightens 2013

→ the economy in Lithuania will recovery

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Yes, it is worth to operate abroad!

• BSR builds a good action place:

“In spite of numerous economic, ecological and cultural

differences, the Baltic Sea States form a cohesive, “domestic

region”. This makes regional cooperation especially important

here, acting as a role model for other regions of Europe. But there

is still more potential to be exploited.”

Günther Oettinger - Commissioner for Energy

• and SMEs:

“…form the backbone of the European economy. They are key to

entrepreneurial spirit and innovation in the EU and thus crucial to

ensure EU competitiveness. “

Erkki Liikanen - Enterprise Commissioner

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Thank you for your attention!

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