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All experts (Minister of Finance Gintarės Skaistė, Director of the Lithuanian Social Research Center Boguslav Gruževskis, President of the Lithuanian Free Market Institute (LFMI) Elena Leontjeva, Chief Economist of Swedbank Nerijus Mačiulis, CEO and entrepreneur of the construction company Hanner Arvydas Avulis and the Investor Forum (CEO Rūta Skyrienė) full information on what life will be like in 2021 can be read here.
Three factors
According to B. Gruževskis, if we want to talk about the prospects for the Lithuanian economy and Lithuanian life in 2021, the future of the country will largely depend on three main factors.
The first, he said, had to do with managing the pandemic and whether efforts to use the vaccine would be successful. The second is with the state and changes in the world economy, and the third is with political stability.
“We are the most affected by the situation in Europe, the European Union (EU), we have Russia and Belarus close, as well as in 2021-2022. Economic relations between the United States and China will also have a major impact.
As for Lithuania, much will depend on the decisions of our Government, “said B. Gruževskis at the beginning of the conversation.
He presented Delfi with two possible scenarios for 2021: optimistic and pessimistic, and said that the latter, in his opinion, is more realistic so far.
“Today, a worst-case scenario is more likely to occur because the vaccine was just introduced, we don’t know what the effects will be. If everything develops as it does today, we can say that 2021 will be more in the shadow of a pessimistic scenario, “he said.
Pessimistic scenario
According to the director of the Lithuanian Center for Social Research, the main characteristics of the pessimistic scenario are related to the insufficient impact of the vaccine on the morbidity of the population. According to him, this may lead to the quarantine lasting until May and the country, due to the existing restrictions, will see a further economic recession.
“In this way, we can see the lack of budget funds as a consequence, since, as a consequence, employment, turnover and many other things will decrease.
“Rising unemployment, insufficient social support, and if there is a shortage of budget funds, clearly there will be less generous benefits, not to mention the indexation of pensions, and as a result, increasing poverty and social tensions,” he said.
According to B. Gruževskis, according to the pessimistic scenario, unemployment could rise to 20% in January and February. and more, and youth unemployment could reach around 30 percent in January, February.
“From February to March, it would be necessary to reduce wages, first of all, of course, for the public sector. Long-term unemployment will also increase and, in terms of the labor market, the capacity of the Employment Service to help and contribute to the support it will be significantly reduced, “he said.
Speaking of changes related to demographics, B. Gruževskis assured that the situation here could change in several ways, because due to the pandemic, the demographic situation of Lithuania has improved due to the increase in immigration, many Lithuanians have returned, but added who see great dangers.
“I believe that the death rate from both COVID-19 and other diseases will continue to rise. Under the pessimistic scenario, we will not be able to cope with access to health care, which will lead to increased mortality from other diseases that cannot be properly treated at high levels of pandemic. This will lower the birth rate. Now it hasn’t dropped much yet, because those children being born started even before the pandemic. There is a danger that people will deliberately plan less for the children during a pandemic, ”he said, assuring that this could lead to a decrease in the total population.
And above all here I see a great negative trend, because it may happen that the impact of the pandemic gradually diminishes, the borders will open, but the Lithuanian economy will not recover quickly and we will have a double effect: on the one hand we will accelerate mortality and on the other people will be more motivated to go in search of a better salary if our economy cannot recover in the long term. Then we can lose many people again due to emigration, “he warned.
B. Gruževskis also stated that, in general, there are many risks in the pessimistic scenario. As you mentioned, this is both a decrease in the standard of living, a decrease in Lithuania’s investment attractiveness, and a high unemployment rate.
Likewise, the decrease in budgetary income will consequently be reflected in the financing of the public sector, which, the same teachers, social workers, etc.
There is also the risk that prices will rise, as production will stop, be limited, which will inhibit the growth of living standards.
In short, I would say that this pessimistic scenario is more realistic today, ”he said.
Optimistic scenario
Speaking about the optimistic scenario, B. Gruževskis said that this plan also hopes to become a reality, but emphasized that everything here will depend on the determination of the Government, because serious changes will require the Government to focus more.
The success of the vaccine was highlighted by identifying the factors that could lead to the development of such a scenario. According to B. Gruževskis, if all goes well, the quarantine in Lithuania could be relaxed already in mid-January, and in February it could be lifted, which will also promote economic recovery.
“The transformation of globalization models will be a very important factor for the successful recovery and development of Lithuania, especially in 2022-2023. At the beginning of the pandemic, it was said out loud that such a traditional model of the global economy, which was developed before the pandemic, was inefficient and risky. Such excessively long production chains are, in fact, harmful to the environment and ineffective in the national context. Globalization must be replaced by a new model, the regional model of globalization, which is why we have a good presence in the EU. We are creating a large regional unit where we can increase the employment of our population and thus spend less money outside of our system ”, he explained.
Likewise, as has been said, the efficient and transparent use of financial resources for economic recovery, a greater differentiation of support measures and the increasing efficiency of public management are very important for the optimistic model.
According to B. Gruževskis, in the optimistic scenario, unemployment should also start to decrease from mid-January, and the efficient use of financial resources, as explained, would increase the capacity of the Employment Service to finance policy measures of active market, leading to shorter vacancy rates, respectively. and employment opportunities.
“Demographic change would be even better,” he hinted. “The optimistic scenario would be to see a safe and effective solution to the problem of health efficiency, to reduce mortality, first, of course, from COVID-19, and then, for other reasons, to restore the pre-pandemic birth rate.”
According to B. Gruževskis, referring to migration, he stated that if Lithuania effectively developed its relations in production, the country could make a big leap in strengthening its IT sector.
“Minsk is now one of the strongest IT sectors in the EU. That is, if now we put all the conditions for Belarusians to come to us, for companies to move to operate here, we can take a big leap and encourage high labor immigration. The growth of a skilled labor force would stimulate elements of economic development, labor market and demographics, “he said, and said that in a generally optimistic scenario, the general standard of living in Lithuania would increase enormously. , although in economic terms.
“If the government’s decisions are not focused on the benefits of individual groups in the sector, we can perfectly develop support, pension indexation, promote and fulfill public sector obligations, increase salaries,” Gruževskis commented.
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