PricewaterhouseCoopers (PwC) presented the findings of its 27th Annual PwC Global CEO Survey at the World Economic Forum in Davos on January 15th. Similarly, in the Baltic region, too, we have been surveying CEOs for more than a decade to find out and compare their opinions, expectations and visions for the business landscape, challenges and growth opportunities. This year we surveyed 387 CEOs in Latvia, Lithuania and Estonia.

The survey suggests that cautious optimism has replaced last year’s pessimistic outlook. Almost one third of Latvian CEOs (31%), slightly less in Lithuania (24%) and Estonia (18%), believe the global economy will improve next year, while more than half of Lithuanian and Estonian CEOs and 39% of Latvian CEOs expect the economic situation to remain unchanged. Lithuanian CEOs are the most optimistic about their domestic economy – 37% expect growth in 2024. 31% of Latvian CEOs are optimistic about domestic economic growth, but Estonian CEOs are sceptical, with 52% expecting economic decline in 2024.

Latvian CEOs expect domestic economic growth

More than one third of CEOs regionally – 44% globally, 32% in Western Europe and 51% in Central and Eastern Europe (CEE) – expect domestic economic growth.

In the Baltics, the majority of Latvian CEOs (63%) expected economic decline last year, but this year sees a considerable change – 31% of Latvian CEOs believe their domestic economy will improve over the next 12 months (an increase of 21 percentage points on last year), while 37% expect the situation to remain unchanged. Lithuanian CEOs are slightly more optimistic – 37% believe the economic situation will improve. Estonian CEOs expecting economic growth are less optimistic (9%, down from 10% last year). The percentage of Estonian CEOs expecting domestic economic decline has dropped, though it remains high  (52%).

Short-term revenue growth forecasts have become slightly more cautious

Baltic CEOs are still very confident in their company’s revenue growth over the next 12 months.

Almost half of Lithuanian and Estonian CEOs (49% and 45%) expect their company’s revenue to grow over the next 12 months (53% in Lithuania and 45% in Estonia last year), while others expect the same level of revenue (38% in Lithuania and 35% in Estonia).

The survey shows that Latvian CEOs are slightly more cautious – 37% expect their company’s revenue to grow over the next 12 months (a drop of 9 percentage points on last year), while 45% expect the same level of revenue (up from 36% last year).

Baltic CEOs are confident in their company’s long-term revenue growth

CEOs are more optimistic about their company’s revenue growth over the next three years, indicating caution resulting from the current economic volatility and uncertainty, with stable growth expected over a longer period.

Baltic CEOs are still confident in their company’s revenue growth over the next three years (72% in Latvia, 79% in Lithuania and 79% in Estonia). Although this indicator is slightly lower than last year, it’s still high.

The survey shows that AI integration in business is becoming increasingly important. Almost half of CEOs in CEE believe that generative AI will increase efficiency during the time they (53%) and their staff (49%) spend at work over the next 12 months, significantly increasing profitability (38%) and revenue (30%). Baltic CEOs also anticipate a greater presence of AI in their own and their company’s day-to-day business, but their forecasts are slightly more moderate.

CEOs expect that AI integration will have a slight impact on their headcount. 14% of Latvian CEOs believe their headcount will decrease by 5% or more because of AI, while 8% say their headcount will increase by 5% or more. CEOs in CEE share similar opinions.

Baltic CEOs keep mentioning challenges around workforce availability. While the situation has stabilised, it’s still complicated, especially in Latvia and Lithuania, with more than 50% of CEOs (64% in Latvia and 52% in Lithuania) saying that recruitment has become more difficult. Only 7% of Latvian CEOs and 10% in Lithuania say their company finds it easier to attract new talent.

A slightly different picture is painted in Estonia, where this year sees the lowest CEO percentage in the last five years saying their company finds it more difficult to attract new talent (38%). The percentage of respondents saying their company finds it easier to attract new talent (26%) has more than doubled, repeating the highest percentage in the last five years in Estonia.

Remuneration prospects

The percentage of Latvian CEOs indicating no plans to revise their staff pay levels has dropped significantly (12%, down from 26% last year). At the same time, the percentage of CEOs planning to increase their staff salaries by up to 5% has risen considerably (53%, up from 30% last year). This means the majority of Latvian CEOs expect to raise their staff salaries by up to 5% this year. Similar to Latvia, the majority of Estonian CEOs (47%) indicate plans to increase their staff salaries by up to 5%, while 45% of Lithuanian CEOs indicate plans to increase their staff salaries by up 6–10% (31% in Latvia and 34% in Estonia). Unlike Latvia, the percentage of respondents indicating no plans to raise their staff salaries has risen in Lithuania and Estonia (11% and 16% respectively).

Baltic CEOs say their companies are taking active steps to minimise climate change, dominated by energy efficiency improvements (55% in Latvia, 55% in Lithuania and 54% in Estonia). CEOs also say their companies are creating innovative, climate-friendly goods, services or technologies (39% in Latvia, 40% in Lithuania and 47% in Estonia) and selling goods, services or technologies that support climate resilience measures (37% in Latvia, 35% in Lithuania and 38% in Estonia).

31% of Latvian CEOs say their companies have drawn up a transition plan for sustainable growth, while 40% are working to prepare one. The percentage of respondents saying their company has not prepared such a plan and has no intention to do so has dropped (29%, down from 37% last year). Estonia has a similar situation, with 28% of CEOs saying their company has drawn up a transition plan for sustainable growth and 41% saying they are about to prepare one. Only one fifth of Lithuanian CEOs (21%) indicate a transition plan, with 44% working to prepare one.

When it comes to the business environment and key threats to business growth, Baltic CEOs highlight geopolitical conflict risk (79% in Latvia and 66% in Lithuania and Estonia) as their top concern. The second most prominent risk  is cybersecurity, while risks such as inflation and energy crisis have lost their significance.