FDI and Investment Uncertainty in the Baltics

Jorge Durán

No 43, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Foreign direct investment (FDI) flows into the Baltic states collapsed during the crisis, experienced a short-lived recovery, and then plunged again. Today it remains subdued despite a modest but sustained recovery. This is worrying because FDI is a channel for technology transfers and its shortfall could imply that the Baltic states risk falling into a ‘middle income trap’ at around 70% of the EU-15 average income. This paper argues that the slow recovery of FDI is rather due to poor international market conditions, holding back investment in general and FDI in particular. Accordingly, FDI is expected to pick up once the economic environment improves. Still, further improving the framework conditions for investment could help to attract and reap the benefits of FDI in the future, particularly in Latvia and Lithuania.

Keywords: Foreign direct investment; capital formation; unit labor costs; FDI and investment uncertainty in the Baltics; Jorge Durán; Héctor Navarrete-Plana. (search for similar items in EconPapers)
JEL-codes: F2 F6 O1 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2019-03
New Economics Papers: this item is included in nep-cis, nep-int and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:043

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