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NewswireToday - /newswire/ -
Riga, Latvia Republic, 03/30/2008 - Three Baltic states (Estonia, Lithuania and Latvia) have been the fastest- growing economies in the continent,while foreign direct investment - largely driven by privatization – has risen dramatically in recent years.
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In the four years since they joined the European Union, the three Baltic states (Estonia, Lithuania and Latvia) have been the fastest- growing economies in the continent. In 2006 their combined average GDP growth was just below 10 percent, dropping slightly to 7.7 percent in 2007, while foreign direct investment - largely driven by privatization – has risen dramatically in recent years. Almost a third of this investment has gone directly into the real estate sector, as demand for high spec offices, retail premises and residential space has continued to increase.
Large multinational companies such as Pricewaterhouse- Coopers and KPMG, and major regional Scandinavian banks such as Sampo have taken significant amounts of space in the three countries, mainly in their capital cities. Since leaving the Soviet Union in 1991, the Baltic States have re-aligned themselves to conduct more trade and have more political cooperation with their western European and Scandinavian neighbours. In 1992 the Council of the Baltic Sea States was established, creating stronger links between all 10 countries that border the Baltic Sea (and Iceland, which joined in 1995). Today, the majority of trade is conducted with Sweden, Norway and within the Baltics themselves.
While Russia remains an export location, relations between the countries and their former ruler cooled markedly following independence and are only now returning to a stable level, according to Valdis Ligers, NAI Business director at NAI Baltics in Latvia. The company joined NAI in 2007 and operates across all three states. "Germany is now our number three partner," says Ligers. "The business environment is becoming increasingly international."
A number of large office devel- opments are cur- rently in progress, including Ulemiste City in Estonia's capital Tallinn, with 180,000 sq m of space, Vilnius Office Park in the capital of Lithuania (33,000 sq m) and Reitumu Capital Centre in the Latvian capital Riga (16,500 sq m). Retail markets across the region are expanding fast. Experts predict that the Baltic States will see retail sales grow more quickly than anywhere else in Europe over the next decade, as Latvia (82 percent), Estonia (68 percent) and Lithuania (67 percent) catch up with their Western neighbours.
The retail property market has doubled in size over the past decade. For the region's economists, the main worry is that so much rapid expansion will cause overheating and prompthighinflation.Latviawillexperience 8 per cent-plus inflation in 2008, according to The Economist. All three states have larger than average current account deficits, with Latvia's among the highest in Europe at around 18 percent and Estonia's at around 14 percent. Economists are cautioning Baltic governments to reduce these deficits and try to curb inflation, but such runaway growth is hard to control.
A major incentive, however, is membership of the euro single currency, which the Baltic States will not achieve unless they bring inflation into check. This is anticipated sometime between 2012 and 2016. Baltics Boom Valdis Ligers Business Director NAI Baltics
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