Speech by Gediminas Šimkus at the joint webinar
"Investment in the Baltics: From pandemic to war"
2022-05-20
Joint Bank of Lithuania, Bank of Estonia, Bank of
Latvia, and European Investment Bank Webinar
"Investment in the Baltics: From pandemic to war"
20 May 2022
Welcome and opening remarks
Good morning, dear Vice President Östros, Governor
Müller, Governor Kazāks, dear colleagues and
webinar viewers,
A warm welcome to this joint webinar organised by
the Bank of Lithuania, the Bank of Estonia, the Bank
of Latvia, and the European Investment Bank (EIB). 
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We are living in extraordinary times: just as the pandemic pressures started to ease, we got hit by another
huge shock - the war in Ukraine. Let me stress that we stand in full solidarity with Ukraine. To date
Lithuania welcomed some 51,000 Ukrainian refugees and is one of the largest donors of bilateral aid to
Ukraine in percentages of GDP.
While we hope for a swift end to this unjustied war, currently the risks that the war in Ukraine escalates
remain high. We are experiencing an unprecedented degree of uncertainty. This is worrying, as numerous
surveys and reports show that uncertainty is the largest barrier for private corporate investment in the
Baltics.
Fortunately, policymakers can address this. As we witnessed in the months following the outbreak of the
COVID-19 pandemic, high quality and well-targeted public investment in times of high uncertainty
enhances output. It also crowds in private investment, rather than crowding it out.
The COVID-19 pandemic offered an opportunity for rms to become more digital. Demand for electronic
services rapidly increased, creating perfect conditions for expansion of electronic payment service
providers. Growth in electronic payments created value in the Lithuanian nancial sector. For instance,
one of the Lithuanian payments start-ups recently attracted an impressive 65 mln US dollar Series A
funding.
The growing Fintech sector also contributes towards solving the structural problem of concentration in
the Lithuanian nancial sector. At the same time, business funding through crowdfunding platforms also
gained traction.
As pointed out in the EIB Investment Survey that will be presented here shortly, total investment in
Lithuania rose to 5% above pre-pandemic levels by the end of 2021. A similar pattern was observed in
Latvia, while in Estonia investment in 2021 stood at staggering 30 to 40% above pre-pandemic levels.
Increased investment and recovering consumption ensured that the Baltic economies recovered swiftly
from the pandemic shock, with GDP growth in 2021 outperforming most of the previous forecasts.
Despite the pandemics, before the russian invasion into Ukraine, Lithuania was on the path of growth and
the long-term economic transformation of digitisation and sustainability. In these unprecedented times
we must stay on this path. No matter the current uncertainty, we need to ensure that investment directed
towards our long-term goals continues. A consistent and speedy implementation of the RRF plans
geared towards climate and digital transitions remains crucial.
The war in Ukraine highlighted the importance of energy independence. Investing into developing
renewable energy sources not only reduces geopolitical energy vulnerability; large-scale and ambitious
green investment programmes also help offset the negative effects of automation - the loss of jobs and
growing regional inequalities. Cheaper and more available green energy also contributes towards
meeting our CO2 emission targets. Despite this opportunity appearing in such a tragic circumstance of
war, policymakers cannot afford to miss the move-away from fossil fuels by directing public funds that
are available towards expanding the renewables sector.
Public investment will provide a spark, but we need a nancial system that is nancing climate-friendly
investment to keep the engine running. Fostering such a sustainability-minded nancial system is an
increasingly important topic for central banks.
One of the strategic goals of the Bank of Lithuania is management of climate related risks. We monitor
our own institutional carbon footprint and manage our own investment portfolio according to sustainable
investment principles. We also established a new centre for Financial Market Development just before
the outbreak of the war and were preparing to open a centre for Green Finance in hopes of increasing
opportunities to attract resources for Lithuanian rms considering green investments.
Dear colleagues,
To conclude, as the well-known saying goes, "Good times don't last, and bad times don't stay forever".
Planning and investing today in preparation for those good times to come is more important than ever.
It is therefore a great honour to open this Investments in the Baltics conference in webinar format. I look
forward to the upcoming discussions and presentations.
Thank you.