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However, Swedbank chief economist Nerijus Mačiulis is reducing Lithuania’s GDP growth forecast for this year to 2.7 percent, but predicts that growth will accelerate to 4.2 percent next year.
“We are losing at least one or a few months until we face the pandemic wave, but of course the summer is hopeful, the funds accumulated by the residents will be spent on the resorts.” Of course, maybe part of those accumulated funds will not be spent in Lithuania when people go on vacation abroad again, but this year we should also expect more active tourism in Lithuania, which would reduce that difference, ”says the economist.
An improving economy can also respond to prices
“The eurozone economy is expected to grow 3.5% this year, and the countries that depend on tourism and suffered the most last year – Italy, France and Spain – should enjoy even faster growth of more than 4 % “. economic growth, ”says N. Mačiulis.
The economist notes that many geopolitical risks have lessened: US protectionist policies will wane for at least a short time, and Brexit happened without drama when a last-minute deal on free trade was reached. Still, tensions between China and the United States and Western European countries are expected to persist.
“As last year demonstrated, the greatest risks are not where everyone’s eyes are. For example, climate change increases the likelihood of natural disasters every year. Today, an acceleration of inflation may also seem 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 the public debt and lessen the euphoria in the stock markets ”, N. Mačiulis mentions possible scenarios.
Exports will be important
“The biggest challenge for the Lithuanian economy is related to the export of services. This was a structure that was very important during the last decade, at that time there may be difficulties with the export of services this year, ”says N. Mačiulis.
“Exports of services could fall by a quarter: transport companies are setting up branches in Poland and will most likely buy part of the vehicles in Poland.” This will be reflected in the statistics of services exports – although there will not be a major shock at the national level, we currently see it as one of the important negative factors ”,
The economist notes 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.
The epidemiological situation remains significant
Economist N. Mačiulis says that when modeling economic expectations and indicators for 2021, it is impossible to ignore the influence of the coronavirus.
“The structural problem of unemployment is still quite acute. The current unemployment rate is 16 percent. – It is false – there is a part of the fictitious unemployment, but the problem of long-term unemployment – will remain, because the workers who have lost their employment in the catering, tourism and services sectors will not necessarily return to the job market this year, ”says N. Mačiulis.
“We still cannot say with confidence that this pandemic will soon be a thing of the past. Mutations of the virus, challenges to vaccines or the reluctance of the general public to vaccinate may delay the development of mass immunity. This would lower expectations of the population and businesses and would push business sectors that depend on tourism into an even deeper well, ”says N. Mačiulis.
According to the economist, the crisis 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,” concludes economist N. Mačiulis.
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