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Prices can rise faster
Opening the press conference, the economist said that in 2021, the virus will continue to be a major risk that will affect our national and global economy, but several factors are expected to stop the spread of the virus.
In particular, as explained, an increasing proportion of the population will have acquired the immunity acquired by both COVID-19 and vaccination. Seasonal factors will also be important: as last year’s experience shows, the virus spreads more slowly in late spring and summer.
“We still cannot say with confidence that this pandemic will soon be a thing of the past. Mutations of the virus, logistical challenges to vaccines, or the reluctance of a large part of the public to vaccinate may delay the development of mass immunity. This would reduce the expectations of the population and companies, and it would push even more business sectors dependent on tourism to the well, ”said N. Mačiulis at the beginning of the press conference, discussing vaccination and the spread of the virus.
Speaking about world GDP growth, the economist said it should reach 4.7 percent, which is not expected to disappear in 2022.
“The eurozone economy is expected to grow 3.5 percent this year, and the countries that depend on tourism and suffered the most last year – Italy, France and Spain – should enjoy even faster, more than 4 percent “. economic growth, ”said N. Mačiulis.
The economist noted that many geopolitical risks had lessened: US protectionist policies would wane for at least a short time and Brexit happened without drama when a last-minute free trade deal was reached. According to him, tensions between China and the United States and Western European countries are still expected to persist.
“As last year showed, the biggest risks are not where everyone’s eyes are.
For example, climate change increases the probability of natural disasters every year. At present, an acceleration in inflation may also appear unlikely. Still, in the medium term, a combination of many factors could accelerate price growth.
This would force central banks to raise interest rates and increase the cost of servicing sovereign debt and lessen the euphoria in the stock markets, ”said the economist.
He predicted that inflation in the country will rise to 2 percent this year and exceed 3 percent in 2022.
“Why do we forecast higher inflation in Lithuania this year and especially in the medium term until 2024-2025, why could it be higher, as the developed countries of Western Europe have not seen in the last quarter of a century? We are already seeing a jump in the prices of raw materials. Oil will be a fifth more expensive than a year ago, although there is no prospect of further price increases, but it will no longer be as cheap as last year.
The surprising thing is that many other industrial raw materials have risen dramatically and at levels much higher than before the pandemic, copper, iron, other metals, but in general, when we want to see an increase in inflation in our ears, we must be attentive to what happens. In China. Looking at China’s commodity price index, we see that the jump was already at its highest level in 3-4 years at the end of last year. Shipping ocean containers from China has historically become more expensive and is about 2.5 times more expensive than in the past two years, “he said.
Lithuania’s GDP will grow 2.7 percent.
Speaking about Lithuania’s economic growth forecast, according to N. Mačiulis, Swedbank lowered it by more than one percentage point, to 2.7 percent, and the main reason for this is several frozen months from the beginning of this year, which should be replaced for a quick recovery. In the year 2022.
“Due to the untimely second wave of the pandemic, the recovery of the Lithuanian economy will be somewhat delayed, but the outlook remains positive. Unlike the spring of 2020, the population’s expectations have hardly deteriorated, and many people they have seen better economic prospects and their personal financial prospects at the turn of the year, ”he said.
According to him, the positive consumer trends are also confirmed by the data of Swedbank card payments. Although consumption slowed a bit after the holiday shopping, it did not fall into the well and was only a small percentage lower than a year ago.
The economist noted that the outlook for export-oriented sectors is much better than for services. In November, Lithuanian exports of goods, excluding petroleum products, were up one-tenth more than a year ago, and rising export orders suggest that growth should continue this year as well.
“In Lithuania, as in many other EU countries, we have seen similar trends: unable to spend money to travel or visit restaurants, concerts or other places where services are provided, residents spend more to buy things and improve their lives. As a result, both the domestic and export industries have recovered extremely quickly, ”said N. Mačiulis.
It is true, he pointed out that so far the accommodation, catering, leisure and entertainment sectors seemed the saddest, but a faster recovery is expected in the second half of this year.
Wages won’t go up so fast anymore
Attention was also drawn to the fact that last year deposits by individuals grew by 18 percent and by companies by up to 37 percent.
It was said that a significant part of the growth in corporate deposits was due to state support, that is, tax holidays, after which excess liquidity will disappear.
Still, according to the economist, the jump in deposits indicates a built-up reserve that should turn into faster growth in consumption and investment as the virus recedes and expectations improve.
“The 2020 crisis was unusual in many respects: corporate and household deposits grew at record rates, apartment prices and wages rose by nearly a tenth, and both retail and exports set new records. At the same time, however, there was a significant increase in the unemployment rate and several companies were forced to suspend their activities, ”said N. Mačiulis.
This year, he said, wage growth will be more modest, which will be related to a slower rise in the MMA and the fact that the most affected sectors will not be in a hurry to increase wages. They are expected to grow around 5 percent this year.
According to him, this crisis, in general, was not homogeneous and not national, there were many winners who lived better and better and many losers who still do not see better prospects.
“Eliminating these inequalities through short-term support measures, long-term investments and recycling programs will not be an easy but important task for the new government,” concluded N. Mačiulis.
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