Page 54 - CE Outlook Regions 2022

3.2.4 Energy & power

Energy issues will be acute in all three Baltic states in 2022. First of all,
due to the lingering detrimental effect of energy price rises at the end of
2021.

The price rise can be especially tangible and painful in Latvia which ca
70% depends on gas-fired hydro plants.
All Baltic energy companies will be especially susceptible as, unlike
households, they have to pay market prices.

The renewable sector, especially in Lithuania and Estonia, is expected
to keep adding new capacity.

3.2.5 Construction

The year of 2022 looks challenging for Baltic construction companies
and real estate developers due to exorbitant material prices, workforce
shortages, and the COVID-19 pandemic-caused supply chain
disruptions.

The situation will likely be especially tough for Lithuanian builders, as
the country’s Central Bank has imposed an additional tax for builders
and tightened mortgage issuance.

That will affect housing prices unless companies agree to cut their
margins – which may be the case, some analysts say.

It seems more likely that construction works will be postponed to wait
out the period of increased costs.

An additional burden is the increase in interest rates, which means
difficulties in the repayment of mortgage instalments for private owners,
but also an increase in interest rates on development loans.
Despite the challenges, real estate development activity should remain
high, especially if development companies do learn to live with lower
margins.

Yet the demand is expected to remain robust, as Balts, especially
Lithuanians, still see real estate as the best form of investment.

54 CE Outlook 2022 www.intellinews.com