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.
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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.
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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. Check findjobdescriptions to learn more about 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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