V.Vasiliauskas: the second strict quarantine will hit the economy again, but the darkest is before dawn | Deal

“Companies are more adapted to the situation of the pandemic, so the impact of the second wave is likely to be less,” said V. Vasiliauskas, presenting the situation on the development and prospects of the Lithuanian economy.

However, according to him, the pandemic is putting pressure on economic life again, especially in the sectors directly affected, such as tourism, accommodation, restaurants, the organization of shows.

However, V. Vasiliauskas affirms that the darkest is before dawn, and the positive changes on the vaccine front give us hope that next year the economy will begin to return to the recovery path that began in the third quarter of this year, but slowed down in the fourth quarter.

According to the main economic development scenario updated by economists at the Bank of Lithuania, the country’s economy is expected to contract 2% this year and next year’s GDP to grow 1.9%. Under the previously announced baseline scenario, 3.1 percent was projected. growth in 2021.

Uncertainty about the consequences of the pandemic for the economy remains high, which is why the Bank of Lithuania states that it has also evaluated alternative scenarios.

In the favorable scenario, if we get the vaccine soon, the fall in GDP this year would be less: 1.4, and next year growth would reach 4.5 percent.

In the worst case, if the pandemic were managed, GDP would contract by 2.7% this year and another 3.3% next.

Wages will grow slowly

V. Vasiliauskas, who mainly examined the main scenario at the press conference, said that the biggest influence on economic fluctuations is made by exports, private investment, consumption and wage changes.

At first, it was possible to distribute the support horizontally, but now it is necessary to allocate the support very precisely.

At the same time, he presented a forecast that despite the economic recovery next year, wages will grow only 2.2 percent in 2021, up from 7 percent this year.

The chairman of the board of the Bank of Lithuania also said that the state budget deficit will reach 8.8 percent this year. GDP and will be one of the largest in the European Union. At that time, the economic recession will be one of the smallest.

Next year, public debt will continue to grow and will probably reach 50 percent. GDP or even more.

With the money borrowed, the government sought to help businesses and residents affected by COVID-19. V. Vasiliauskas estimated that support to companies with subsidies for downtime, loans or opportunities to avoid paying taxes amounted to about 900 million. euros.

According to him, during the first quarantine in the spring, the government distributed the money without choosing too much, but now aid measures must be aimed at those most affected.

“It is understandable, at first it was possible to pour support horizontally, but now it would be necessary to allocate support very precisely,” said the Governor of the Bank of Lithuania.

Greater uncertainty

V. Vasiliauskas stated that the increase in exports between the first and the second quarantine was what contributed the most to the recovery of the Lithuanian economy, and tourism, accommodation and catering companies suffered the greatest losses during the pandemic.

He noted that compared to the Baltic countries, the number of coronavirus cases in Lithuania has increased significantly since the end of October.

“This is proof that the reaction has been delayed and the burden on the health system is high,” said the chairman of the board of the Bank of Lithuania.

According to him, after the introduction of quarantine measures by the government still in autumn, the impact on population mobility was less than in the spring, which led to a better economic situation, but to higher morbidity.

However, during the second wave of COVID-19, business confidence indicators are falling again, unemployment is increasing, especially among young people, warned V. Vasiliauskas.