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GDP fell by less than 1 percent.
Opening the speech, N. Mačiulis said that he would speak about the crisis and the scenario, the outlines of which are already clear today, and what can be expected in the coming years.
“When it comes to ending this crisis, it does not apply to all countries or to all sectors. We had the second wave of the pandemic in Lithuania, it has already stopped. <...>“” Said the interlocutor, but said that we have to speak very carefully about any business or liberation of life today so that things do not turn into a third wave.
“Vaccination is the only way out of this crisis, we are moving towards it, but we are progressing much slower than many other countries in the world, the European Union (EU) is lagging behind. Global mass immunity is only likely in the fall, ”he briefly commented on the virus situation.
Overall, considering the economic consequences of the pandemic and quarantine, according to him, Lithuania was one of the least affected in the euro zone.
The country’s GDP has been reduced by less than 1%, but, as we have pointed out, if we look at the humanitarian consequences, the deaths, the situation is different.
“We are one of the worst countries in the EU, second in terms of the number of excessive deaths at the end of last year,” said the economist.
You see puffy bubbles
Speaking of the economic consequences, N. Mačiulis assured that Lithuania has very few and that the impact of the second wave on the economy is much less last year than in the spring.
“If the population’s expenses were then reduced by a third, now we can see that they have been reduced by a tenth, and all in specific areas where spending is limited: travel, hotels, restaurants and some leisure services.
The rest of the economy is thriving. This is illustrated by many indicators, for example, if you look at the export of goods of Lithuanian origin, it would be really difficult to see any crisis at the moment. The industry is on the wave and this is related to the high demand for Lithuanian goods in Europe and other countries in the world ”, he explained, and said that today it is difficult to see signs in Lithuania that point to a second recession or a well in Lithuania. .
According to him, both the economic policy of the states and the fiscal stimulus in Lithuania, as well as the countercyclical fiscal policy in our export markets have contributed significantly to such a situation in the country.
“Many European countries have reached new all-time highs with their national debts, but neither public debt nor budget deficits are a stigma at the moment.
We see that all countries are borrowing at historically low interest rates, even those with a debt / GDP ratio 3 times higher than that of Lithuania, “he said, but assured that it was natural that the question arose in this context: Can they be solve all the problems by printing money, if there are no negative side effects and if not they will return to the boomerang?
It is true that, according to him, those secondary effects of central bank policy can already be seen.
“At the margins of the economy, especially in the financial markets, we see what is not very normal and what will cause headaches in the future.
The slowdown in stock markets lasted less than the pandemic. Investors, seeing the money printing, had a great appetite for risk and invested not exactly where there is a return, but also where there is great risk.
And we see that today the gap between growth and the value of stocks has risen to record levels. There was not only an attempt to invest where a positive return could be obtained, but also where astronomical income growth was expected and not a single bubble burst in the equity markets, but across the spectrum.
Game Stop is a marginal example, but looking at the makers of electric cars, cryptocurrencies, we are again seeing investor searches based on unrealistic assumptions. By the way, it is often “heated” and borrowed money, “he explained, assuring that the euphoria of throwing borrowed money into stock markets is often visible before the bubble bursts.
“It is difficult to predict them, because until now the fact of the bubble is being ignored by everyone and fundamental economic indicators are being said, and such high stock prices can be explained by the fact that money does not cost anything and interest rates They are at all-time lows, but the crucial question is, what will cause subsequent fluctuations and possible bubble bursts?
I think it will be related to the increase in interest rate changes in the bond market. And now we have a record percentage of debt from securities with negative yields. <...> and it is clear that this environment encourages investment in high risk assets, and in part this may explain the rise of Bitcoin from the ashes, “said the economist.
Call to prepare for the price hike
According to N. Mačiulis, the end of this stock market euphoria will be created by rising inflation, which is already visible and has already increased bond yields.
“Here, the US yield has increased from half a percent to 1.5 percent. For a short period of time and this is related to the increase in prices. Unlike what happened in the last decade, it is seen everywhere in the context of increasing money supply.
We have long seen a combination of inflationary pressures coming from a variety of sources. The price of oil has returned to pre-crisis levels, the price of copper and iron is at its highest level in 5 years <...> wheat, corn, soybeans, also beat 6 m. price records, ”he said.
As you said, there is also an increase in the cost of shipping by sea containers and in general there are a lot of short-term factors that will drive inflation up in the near future in both the EU and the US and push prices. of the bonds.
“I think many really noted the risk of inflation a few months ago, and for a clear reason: there has been no inflation in developed countries in the last quarter of a century, and when you see such a long period without it, no matter what. , you agree and say you probably won’t.
And there is another important source of inflation, which is the great accumulated potential of supply of consumption and investment. Throughout the year, household deposits grew by more than a fifth and corporate deposits by 40%. <...> and seeing the end of the crisis, people will spend that money and there will be visible economic growth that will translate into higher inflation and greater volatility in financial markets, which must be prepared, “warned the economist.
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