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Lithuania Economical Facts

 

Economical overview

Lithuania's economy is fully aligned with the EU and since the New Year 2015, the country has joined the euro. After a turbulent period during the global financial crisis of 2008-2010, the Lithuanian economy is back on its feet. The service sector is dominant, but oil refining and agricultural exports are also important elements. EU grants make up a significant portion of the state budget.

During the Soviet era (1944–1991), the agricultural country of Lithuania underwent industrialization and was incorporated into a state-controlled planning economy with access to cheap energy and a large internal market. The collapse of the Soviet economy in 1991 also led to a collapse of Lithuanian industrial and agricultural production. Independent Lithuania suffered from Russian oil embargo and increased fuel prices, and the country lost markets in the former Eastern bloc. Industrial production more than halved in 1991–1993 and gross domestic product (GDP) decreased by one third until 1994.

  • Countryaah.com: Major imports by Lithuania, covering a full list of top products imported by the country and trade value for each product category.

Adaptation to the open world market during the 1990s became difficult. Foreign trade was liberalized, and prices of goods and services were released free with soaring inflation. In 1993, the new currency was introduced. The growth that started was slowed by the banking crisis and the Russian financial crisis, but in return exports were directed against the EU. With increased exports, Lithuania's growth became the highest in the EU in the years following the turn of the millennium. At that time, domestic private consumption had also increased due to increased real wages, falling unemployment, low inflation and low interest rates.

  • Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including LTH which represents the country of Lithuania.

Economical Facts of Lithuania

Privatization of companies, housing and agricultural land initially took place with investment checks distributed to the Lithuanians. But former executives embraced great values ​​for their own part, and in 1997 Parliament decided on contract sales, which accelerated the process of housing and small and medium-sized businesses. However, the privatization of large industrial companies, especially in the energy sector, has been problematic (see Natural Resources and Energy).

Rapid rise...

Lithuania attracted foreign investors through low wages and the EU's second lowest corporate tax rate of 15 percent. Telia Sonera is the principal owner of the telecom company Teo LT and the mobile operator Omnitel. The largest Lithuanian banks are owned by Swedish SEB and Swedbank, but many Scandinavian investments have also gone to small and medium-sized companies, usually in the manufacturing industry.

Free enterprise has dramatically changed the economy of Lithuania, although much reform work remains, for example in agriculture. Bureaucracy and corruption are problems in government and business. The informal sector is large, estimated at between 15 percent and 28 percent of GDP, and the tax evasion is still significant.

Lithuania's rapid economic upswing in the early 2000s was unevenly distributed in the country with strong growth in Vilnius, Kaunas and Klaipėda, while the countryside and smaller cities were hit with unemployment and social problems.

From 2002, Lithuania's GDP increased on average by 7.5 percent annually, but in 2008 the economy was slowed by the international financial crisis. The Swedish-owned banks' cheap loans had contributed to a consumption boom, construction boom and an overheated real estate market. With austerity and tax increases, the government sought to stem a growing budget deficit.

... and fast fall

In 2009, figures for the Lithuanian economy collapsed. Retail and the construction industry, which contributed strongly to previous growth, fell dramatically. GDP fell by almost 15 percent during the year, and budget deficits and unemployment grew. With the aim of switching to the euro, the government avoided devaluation and maintained the fixed exchange rate against the euro. Instead, salaries, pensions and unemployment benefits were reduced by public employees in an attempt to regain competitiveness.

In 2010, the economy turned upwards, and with the help of increased exports, the recovery was faster than expected with a strong GDP rise in 2011 and 2012. High unemployment fell, inflation was moderate and despite increased borrowing during the financial crisis, the government's debt remained just over 40 percent of GDP 2012, which meant that the requirement for entry into the euro zone with a good margin was met. However, the government had to fight more to keep the state's budget deficit below the EU requirement of 3 percent of GDP. In July 2014, Lithuania was given a clear sign to join the euro zone, which happened at the turn of the year 2015.

EU countries' rapidly deteriorating relations with Russia from spring 2014, when Russia annexed the Ukrainian Crimean Peninsula, adversely affected Lithuania. Russia is traditionally the country's largest trading partner, but sanctions and trade boycotts in the wake of the political crisis have led to a sharp decline in Lithuania's important agricultural exports to Russia. In 2015, GDP growth was 1.6 percent, compared with an average of just over 4 percent per year in 2011–2014.

In the long run, however, the population decline is the worst threat to the Lithuanian economy. The country has lost around a fifth of its population since 1990 due to extensive emigration and low birth rates (see also Population and Languages). The emigration has mainly affected the economy of the countryside and the small towns. A serious consequence is a lack of skilled labor in several industries. Other obstacles to the development of the economy are corruption, tax evasion and bureaucracy, despite a series of measures by various governments.

FACTS - FINANCE

GDP per person

$ 19,090 (2018)

Total GDP

US $ 53,251 million (2018)

GDP growth

3.5 percent (2018)

Agriculture's share of GDP

2.7 percent (2018)

Manufacturing industry's share of GDP

17.0 percent (2018)

The service sector's share of GDP

61.1 percent (2018)

Inflation

2.3 percent (2019)

Government debt's share of GDP

34.2 percent (2018)

Currency

Euro

2010

November

Anti-Semitic statement shuts down civil servant

An official at the Interior Ministry is forced to resign, after EU ambassadors protested against a published article in which he labeled the Holocaust as a legend of six million murdered Jews.

July

Pension law is stopped

The government's proposal to raise the retirement age is halted in parliament, when several of the coalition's own members vote no. The government's other savings measures are slowly pushing down the budget deficit.

June

President dead

Former President and Prime Minister Algirdas Brazauskas dies.

April

No to spelling reform

Rejects Prime Minister Kubiliu's proposal that the Polish minority and other non-Lithuanians should be allowed to spell their names in the original language of the passport;

January

The Foreign Minister is forced to resign

Foreign Minister Vygaudas Ušackas is forced to resign after being in conflict with President Grybauskaitė on foreign policy towards Belarus and on the issue of secret CIA prisons in Lithuania (see Foreign Policy and Defense).

 

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