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Congestion and crowded trams indicate that gradually after the coronavirus wave, people return to work and normal life. The Bank of Lithuania is also registering signs of economic recovery. Even in the heat of the coronavirus, the country’s economy is forecast to contract by more than 11 percent, but now the central bank is easing such forecasts: Lithuania is said to have weathered the first wave of the coronavirus shock better than expected.
Lithuania’s GDP is expected to drop slightly less this year, by almost 10 percent. Despite softer forecasts, staff salaries are already announced.
“We forecast a 2-3% drop in wages. Specifically, the current forecast is 2.6 percent. As for next year, we expect a 2 percent rise in wages,” says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
However, according to economist Sigismund Maurice, such salary forecasts from the Bank of Lithuania are too conservative. Especially since surveys of companies in full quarantine show that only about 10-20 percent of the country’s big companies plan to cut wages for some employees, other companies only promise to freeze wages or salary supplements. According to Maurico, this year a small increase in wages can be forecast, depending on the sector.
“I think 2 to 4 percent. This is such a realistic scenario. Similarly, by the way, the European Commission predicts a slightly lower rate for Estonia and Latvia. But since we have further increased the minimum wage, the wages of some workers have increased, despite the fact that there is still an economic shock. The salary of a certain part of the employees will decrease significantly, but the average should not be bad, ”says chief economist Sigismund Mauricas.
Surveys show that construction and service companies have been the most affected by the quarantine. Real estate companies estimate that because coronavirus home sales fell up to ten times, new projects were halted. According to the Bank of Lithuania, the flow of housing loans decreased by 30 percent during the quarantine period.
“That is, if around half a thousand apartments in Vilnius were sold per month, then 51 apartments were sold in April and 48 apartments in May. 5 apartments were sold in Kaunas in April, none in May, ”says Tomas Sovijus Kvainickas, Investment and Analysis Manager at Inreal Group.
According to the Bank of Lithuania, the decreasing number of employees since the beginning of May, the movement of the recovering population and internal demand show that the economic situation stabilized last month.
It is true that Eurostat announces that the annual decline in trade in Lithuania in April is the largest in the Baltic States. Compared to the same period last year, retail sales in Lithuania fell by almost 18 percent in April. While in Latvia – 9 percent, in Estonia – 15 percent.
“This decrease was largely due to the fact that Lithuania had stricter quarantine conditions in Lithuania, especially compared to Latvia, which also allowed the operation of large supermarkets, restaurants and cafes, which in Latvia were reduced by only 9%. percent, “Ž said. Mauricas
The National Network of Poverty Alleviation Organizations ensures that the effects of quarantine have been felt more by the poorest people. A survey carried out in the midst of the quarantine showed that a tenth of the Lithuanian population lacked money for food and a fifth had no funds to pay for renting a home or utility bills.
“People with an income per farmer of less than € 300 a month face such financial problems. Also for those whose main source of income is state benefits and other supports,” says Aistė Adomavičienė, the head of the network of organizations of poverty reduction.
As a result of the effects of the coronavirus pandemic, the country’s unemployment rate is expected to rise this year to around 12 percent, and inflation to 0.6 percent.
Admittedly, according to the central bank, the country’s commercial banks, even in the worst case scenario, could withstand a third of deposit withdrawals, even five times more than the largest decline in deposits during the previous crisis.
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