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The Baltics defy Europe's FDI downturn as investor confidence hits a record high and geopolitics turns risk into new opportunities in defence, energy and technology.
In brief
- The Baltics attracted 65 foreign direct investment (FDI) projects in 2025 (Lithuania 30, Latvia 28, Estonia 7). Lithuania grew 15% year-on-year and re-entered Europe's top 25.
- Latvia leads the region on jobs, generating 1,015 new FDI-related jobs in 2025 and the highest cumulative job creation across 2023-2025.
- 69% of investors expect Baltic attractiveness to increase over the next three years, and 64% plan to establish or expand operations in the region within the year.
While Europe recorded its weakest FDI performance in a decade, the Baltics held their ground in 2025. The three countries together attracted 65 FDI projects and, as part of the Eastern European and Baltic group, moved against the wider European trend. Lithuania re-entered Europe's top 25 destinations, Latvia posted the highest number of FDI-related jobs in the Baltics over the last three years, and Estonia recorded the strongest three-year gain in investor sentiment. These are the main conclusions of the EY Baltic Attractiveness Survey 2026, the annual study conducted by EY that gauges the attractiveness of the Baltics as a destination for foreign investment.
Europe experienced a difficult year for FDI. The continent recorded 5,026 projects, down 7% on 2024 and 24% below the 2017 peak, and job creation fell 25% year-on-year to around 200,000, the lowest level in a decade. Europe's largest destinations took the biggest hits (France -17%, UK -14%, Germany -10%), while Southern, Central and Eastern European economies gained ground: Turkey (+20%), Romania (+16%), Lithuania (+15%), Poland (+10%) and Spain (+7%).
Investors are looking at the region through the lens of resilience, speed and strategic relevance. If Lithuania, Latvia and Estonia can turn progress in defence, energy, AI and technology into a more coordinated regional proposition, the Baltics can become an even stronger investment platform.
1. The Baltics outperform Europe as FDI slows
While Europe's project count fell 7%, the Baltics moved with the Eastern European group that grew about 1.9%. Lithuania stood out with 30 projects (+15%). Latvia recorded 28 projects (-15%), and Estonia dropped to 7 projects (-13%).
Adjusted for population, the picture is stronger still: Latvia ranks #7 in the EU for FDI projects per million inhabitants (15.08) and #8 for jobs created per million (546.6), ahead of the United Kingdom, Switzerland and the Netherlands. Lithuania comes in at #11 for projects per capita.
The jobs picture reinforces the outperformance. Latvia moved into the lead in both 2024 and 2025 (1,937 and 1,015 FDI-related jobs), giving it the highest cumulative job creation across the three-year period. Lithuania delivered 887 jobs in 2025 while Estonia added 306.
The 2024-2025 decline reflects a weaker European cycle rather than a collapse in Baltic appeal; investment is shifting toward capital-intensive sectors such as bioeconomy, smart energy, high-value manufacturing, ICT and defence, which attract sizeable capital but fewer immediate jobs.
Investor sentiment tells a story of divergence:
Country |
2026 sentiment |
3-year change |
|---|---|---|
|
Lithuania |
70% |
+2% |
|
Estonia |
68% |
+8% |
|
Latvia |
54% |
-12% |
Job creation
2208
2208
jobs created by FDI in the Baltics in 2025
2. Geopolitics: the defining risk, and the defining opportunity
Investor concern in the Baltics has moved from general business risks to strategic resilience risks. Geopolitical tension is clearly the top issue across all three countries: Lithuania 48%, Estonia 46%, Latvia 42%. Proximity to Russia and Belarus raises perceived risk and can delay decisions.
But the same geopolitical pressure is creating opportunity. The Baltics' position on NATO's eastern flank is attracting greater strategic attention, and defence spending is rising at historic levels across Europe. Defence-related FDI projects rose 84% in 2025, creating close to 7,000 new jobs, with the strongest activity in the UK, France and Ukraine. In the Baltics, 56% of investors in Lithuania and 50% in Estonia say current conflicts have actually increased their investment plans, versus 42% in Latvia. That creates a real window to attract investment, build defence technology ecosystems, and position the region as a leader in defence innovation.
3. AI is the make-or-break factor for future competitiveness
Artificial intelligence has moved from a technology field to a decisive factor in how investors view the Baltics. The region is at a critical moment: success will depend less on building foundational AI models and more on the speed and scale of AI adoption across businesses and public institutions. Without decisive action, the Baltics risk falling behind other investment destinations.
37% of investors already rate the Baltics as more attractive than other locations for AI investment, against 26% who see it as less attractive. Estonia leads with a 46% net positive rating, while Lithuania and Latvia sit closer to the middle of the pack. Overall, the region is viewed as only moderately attractive as an AI destination — the ceiling is real, but so is the opportunity.
Three priorities emerge from investor feedback:
- AI adoption across business processes, operations and public services. Investors want to see AI move faster from experimentation into practical use across companies and public institutions.
- Workforce skills, education and R&D. The region's future AI competitiveness will depend on stronger digital skills, closer links between business and academia, and more support for AI-driven entrepreneurship.
- Technology infrastructure. Investors point to the need for stronger digital foundations, including data centres, open databases, connectivity and other infrastructure that can support AI deployment at scale.
The link back to workforce is direct. The Baltics' strongest long-term advantage remains the quality and availability of talent, and with small domestic markets, future growth will depend on exporting high-value products and services in AI, biotech, MedTech, pharmaceuticals and adjacent innovation sectors.
37% vs 26%
37% vs 26%
of investors see the Baltics as more attractive than less attractive for AI investment
4. Energy: security achieved, affordability the next battle
Energy has become the sharpest edge of investor decision-making in the Baltics. In Estonia, energy costs jumped from 24% (2024) to 40% (2026) as the top decision factor for investors. In Latvia it ranks second (26%) behind tax competitiveness. In Lithuania it has climbed to 22%, alongside macro stability and predictable regulation.
On the positive side of the ledger, the Baltics score relatively well on energy security and on balancing security with sustainability. Systems are perceived as stable and resilient — a hard-won position after years of investment in independence from Russian energy. But affordability is a different story. High energy costs are seen as a significant barrier to competitiveness, and the concern is amplified for AI and technology-intensive industries with heavy compute needs.
Investor expectations align closely with the region's national strategies: continued green energy expansion, energy storage, grid modernisation and digitisation. The question is speed. Faster execution on these priorities could turn today's cost disadvantage into tomorrow's competitive edge.
The Baltics have achieved energy security. The next challenge is making energy affordable.
5. High-value sectors can turn investor appetite into growth
The 2026 survey is unambiguous on investor appetite: 64% of executives plan to establish or expand operations in the Baltics within the year, and 69% expect regional attractiveness to increase over the next three. The bottleneck is not interest – it is execution.
Alongside geopolitics, administrative complexity and bureaucracy stand out as one of the biggest practical barriers to converting interest into real projects. The decision logic supports this: tax competitiveness has become the leading factor in Latvia (34%), predictable regulation has more than tripled in Lithuania (from 6% in 2024 to 20% in 2026), and macroeconomic stability is now among the top three factors in every Baltic country.
A parallel priority is strengthening local businesses. Current support mechanisms for SMEs in Latvia and Lithuania were described as insufficient. Better support for local companies would deepen the supplier base for foreign investors, create future regional champions and align with the messaging of investment promotion agencies across the region.
Sectoral priorities reinforce where the effort should go. Investors in Lithuania flag semiconductors and electronics (38%) and biotech and pharma (34%) as top policy priorities, while Latvia and Estonia most often name software and IT services. Across the region, the direction is consistent: high-value, tech-driven sectors – AI, defence and defence tech, semiconductors, software and IT services, cleantech and fintech.
69%
69%
of executives expect Baltic attractiveness to increase over the next three years
About the EY Baltic Attractiveness Survey 2026
The EY Baltic Attractiveness Survey draws on two main sources:
- The EY European Investment Monitor (EIM). A proprietary database, produced with OCO, tracking FDI projects that create new facilities and jobs across 47 European countries in 2025. It excludes M&A, joint ventures (unless they create new facilities or jobs), portfolio investments, retail and leisure, hotels and real estate, utilities, extraction activities, replacement investments and non-profits.
- The perception survey. An anonymous online study of international decision-makers conducted by FT-Longitude. For the Baltics, field research ran in March and April 2026 with 150 senior executives (50 each in Lithuania, Latvia and Estonia). For Europe, field research ran between 11 February and 30 March 2026 with 500 senior executives.
Summary
The EY Baltic Attractiveness Survey 2026 shows that the Baltics outperformed Europe in attracting foreign direct investment despite a continent-wide slowdown. Together, Lithuania, Latvia and Estonia secured 65 FDI projects in 2025, while investor confidence reached a record high. Lithuania returned to Europe’s top 25 investment destinations, and Latvia led the region in FDI-related job creation. Geopolitical tensions remain the main risk but are also creating opportunities in defence and strategic industries. AI adoption, workforce skills and digital infrastructure are emerging as critical competitiveness factors. Energy affordability and reducing administrative barriers will be key to sustaining future growth.