Regional Competitiveness in the Baltic States Before and during the COVID-19 Pandemic

Abstract

This article analyzes the growth of the economy of the Baltic States and its sustainability before and during the COVID-19 pandemic. To identify the reasons for the differences in the economic growth of the Baltic countries, a comparison of the main indicators of international competitiveness and their growth rates is made.

The highest indicators of economic growth in 2017–2019, as well as economic stability in 2020–2021, were in Estonia. The growth and sustainability of the Lithuanian economy was slightly lower than in Estonia. But on a number of indicators, including the growth rate of GDP per capita, exports, productivity, the volume of accumulated FDI, the growth of net turnover of companies, Lithuania was significantly ahead of Estonia, and in terms of purchasing power parity, Lithuania was ahead of Estonia.

This study concludes that the main reasons why Latvia's international competitiveness lags behind Estonia and Lithuania, and as a result, lower economic growth rates, purchasing power parity indicators and the level of economic stability are mainly not external, but internal reasons. First of all, it is less effective economic policy and economic development strategy than in Estonia and Lithuania and/or less successful implementation of economic development strategy and plans.
It is also concluded that, probably, one of the reasons for the continued lag of the Latvian economy behind Estonia and Lithuania may be that Latvia has a significantly higher tax burden on labour.

Keywords: Regional competitivenes, Economic growth, Baltic state, Comparative analysis, COVID-19

JEL Classification: O11, O40, O52