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Nerijus Maiulis, chief economist at Swedbank, photo by Judita Grigelyts (V).
Lithuania’s GDP will decline this year less than the average for the euro area and other Baltic countries, Swedbank economists predict. They claim that the bottom has already been reached and that a slow economic recovery is beginning.
Looking at electricity consumption, payment cards, credit flows and the registered unemployed, Swedbank economists estimate that Lithuania’s GDP will drop by almost a tenth in the second quarter of the year.
We assess the difficult situation in export markets and a possible recovery, we change the forecast for the change in GDP of Lithuania from -5.0 percent this year. to -6.5 percent, but this should be the smallest decline among the Baltic countries, says N. Maiulis. Lithuania’s GDP is forecast to grow 4.5% next year.
The world and the Baltic countries are closer to the optimistic scenario and the pessimistic scenario will be avoided. We anticipate that Lithuania’s GDP will decline less than the euro area average and less than in other Baltic countries, N. Maiulis said during the video conference on Wednesday.
Swedbank’s pessimistic scenario shows that the country’s GDP could be reduced by approximately 10%.
Fund reached, wait slow recovery
According to N. Maiulis, the economic recovery is now likely to be more similar to the flattened V-shaped scenario, or whether poop will resemble the growth curve between V and U. After hitting bottom in the second quarter of the Second half of the year, a slow recovery will begin and we will reach the level of the pre-crisis economy in two years, around 2022.
In his opinion, even the benchmark scenario of the U-shaped crisis announced by the Bank of Lithuania in March, hoping that the economy will shrink by 11.4%, is no longer valid.
I believe we will have a flat V-shaped recovery scenario. Although some fallout may occur, the pre-crisis level appears to be around 2022. Pridr economists.
In March, the Bank of Lithuania updated and compiled three economic development scenarios. The first scenario of a strong recession and longer recovery (11.4% of GDP in 2020) is a U-shaped recession. The second is a recent scenario of recession and recovery (20.8% of GDP declining in 2020). The third scenario of a strong recession and rapid recovery (3.4% GDP decline in 2020) is a V-shaped recession.
Swedbank now forecasts that the world economy will shrink by 3.8%, with the euro area GDP forecast reduced to -6.9% (growth is expected in 2021 + 4.6%). Economies are expected to shrink further in countries that have been affected by the crisis, are the most affected by the pandemic, and have limited resources to cope with its consequences. Italy’s GDP is projected to contract by up to 9% (recovery in 2021 + 4.8%).
Compared to Latvia and Estonia, a decrease of 7.5% and 7.0% is forecast for this year, respectively. 4.3% and 5.0% of GDP growth.
Oversees the recovery of internal demand.
Swedbank economists also predict that the Baltic economies will not experience the same recession as southern European countries, which are already experiencing a recovery in domestic demand due to quarantine measures. Economists cite several reasons why the Baltic countries should not be among the worst affected during this crisis.
Firstly, the virus touched the Baltic states, we were left in the paradises of the pandemic. Membership of the euro area also offers favorable debt opportunities, while low sovereign debt offers a greater margin for countercyclical fiscal policies. A stable financial system, high bank capital adequacy ratios and loan guarantees give us hope that the flow of credit will not flow, “said N. Maiulis.
The lower dependence on inbound tourism and the structure of exports also suggest less impact, he added.
Real estate prices will fall approximately 10%
The economist is used to the fact that the Baltic countries are highly dependent on exports, and currently the greatest uncertainty and risks are related to the recovery of demand in the health of export markets.
However, it draws dmesN. In May, the Baltic crisis was met with an overheated and unbalanced foreign trade deficit, a housing bubble (ER), and the population and population had no excessive financial obligations.
There are no preconditions for a large correction in property prices, says N. Maiulis.
But Vilnius sales prices fell 4% in April, and actual transaction prices may be even more mixed.
But average property prices should measure around 10%. Rental prices in Vilnius Old Town have dropped a tenth in two months, but the deals are probably even more favorable in favor of tenants, as the bargaining power of buyers, as well as tenants, has increased, said the economist.
PHOTO GALLERY Swedbank forecast for May 13, 2020 (28 photos)
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