Luminor: Lithuania’s GDP growth in 2021 will be one of the lowest in the EU and the recovery next year

“Due to severe restrictions on economic activity, we will experience a recession in the first quarter of this year and we will only have a more sustainable recovery in the second half of the year. The overall annual result will not be very good this year,” says Sigismund Mauricas , Luminor’s chief economist.

While some sectors continue to show strong resistance to the crisis, continued quarantine restrictions and widening gaps between different sectors of the economy may slow the overall economic recovery in the second quarter of this year. Therefore, according to Ž. Maurico, the probability is that, unlike in 2020, in the summer, we will not see a rapid recovery of the V shape, but a slightly slower recovery of the U shape.

“Lithuania’s total GDP growth this year should be less than 2% and it will be one of the lowest in the European Union (EU). But it should be quite fast in 2022, there are all the prerequisites for that. It looks like Lithuania it will be the best of the worst countries, “he says.

[infogram id=”e4ca89bf-ffc9-4acb-a997-e01839787758″ prefix=”0EW” format=”interactive” title=”Makroekonomikos prognozės: Luminor 2021 03 22″] [infogram id=”8d1a5c0b-2795-49d4-8e8d-fd6261100329″ prefix=”cR4″ format=”interactive” title=”Skirtingos BVP prognozės 2021 03 19″]

February 9 In the forecast presented in 2021, Luminor announced that if the quarantine was extended until May, it is likely that Lithuania in 2021 will experience a decrease of 1.7%, after the preliminary decrease of 1.3% of GDP registered on last year by Statistics of Lithuania.

photo :: 1left

Luminor predicts that due to the uneven economic recovery in 2021, the unemployment rate in Lithuania should rise to 9.2%. However, wage growth will remain positive at around 6% this year.

Ž. According to Maurico, one of the most important tasks this year will be to prevent the emigration of young people and the growth of the underground economy. The lack of liberalization of crisis-sensitive sectors for a long time could encourage companies to operate in a non-transparent manner and those who work in them to seek better job opportunities abroad.

“It may happen again in 2009. situation,” he warns.

Attention should also be paid to the sustainability of public finances, as Lithuania’s budget deficit is higher than in most of the Baltic, Scandinavian and Visegrad countries, according to economist Luminor.

“K” forms of recession

Ž. Mauricas warns that the Lithuanian economy is experiencing a recession in the form of the letter “K”, which may have long-term negative consequences for the country’s economy and the competitiveness of individual sectors.

According to him, the K-shaped recession is a phenomenon of the second quarantine, because during the first quarantine most of the economic sectors experienced a V-shaped recession, that is, they all sat in a single boat. Meanwhile, during the second quarantine, some sectors are not in decline at all, and some are in a much greater decline than during the first quarantine.

Last year, for example, population mobility fell dramatically in both food and non-food businesses (also turnover), causing a V-shaped crisis in both sectors. However, during the second quarantine, population mobility decreased only in non-food businesses, but increased in grocery stores.

Consequently, in 2021. In January, the annual growth of the turnover of food trading companies was 9.2%, while that of non-food trading companies decreased by 14.4%. Interestingly, earlier this year, the mobility of the Lithuanian population in non-food trade and leisure services decreased the most across the EU, and the mobility of the population in food trade places increased the most across the whole of the EU. .

Led by industry

However, Lithuania’s real estate (RE) sector remains one of the most resilient to the crisis: the number of real estate transactions concluded last year decreased by only 1%, and in January and February of this year there was more buying and selling of individual houses and lots. transactions were concluded that at the same time last year, the sale of apartments fell.

2020 Dow Jones Stock Indices Warehouse, industrial real estate and multifunction stock indices increased 12%, 14% and 17%, respectively, since the beginning of the year.

According to Ž. Maurico, this year’s recession is likely to be avoided by the Lithuanian industrial sector, whose change in value added remained positive last year, and the ambitious investment plans of companies in the industrial sector suggest that the industry will maintain growth. positive in the next few years.

“Industry is the sector that pulled Lithuania out of the biggest crisis. Last year, the growth of the industry was impressive, we surpassed countries like Poland, ”says Ž. Mauricas.

The EU is in a worse position than the US.

According to Luminor in his review, the COVID-19 pandemic saw the start of a severe economic shock in almost every country in the world, fueled by fears of the virus, quarantine restrictions, and disrupted global production chains. Today, however, the gap between countries is widening.

According to Ž. Maurico, the recent and steep gap between the European Union (EU) and the United States (US) is worrying.

“The EU will almost certainly lose out from this crisis.” The biggest gap is widening between the EU and the US, “he said.

It is based on forecasts by the Organization for Economic Cooperation and Development (OECD) that the US economy will return to pre-crisis levels in the second quarter of this year, while the EU economy It will only do so in 2023. at the end.

According to Ž. Maurico, the growing gap between the EU and the US is largely due to several factors.

First, quarantine restrictions in the US are much more lenient than in the EU, and several US states, such as Florida and Texas, have already lifted all quarantine restrictions. Second, the COVID-19 vaccination program in the US is much faster than in the EU. In the US, 24% of the population has received at least one COVID-19 vaccine, compared to an EU average of just 9%. Third, the stimulus package is higher in the US than in the EU. In 2021, the US economic stimulus package will reach about 10% of GDP, and in EU countries, about 6%. Fourth, unlike the United States, the EU does not guarantee the free movement of citizens within the Community, which prevents the recovery of southern European countries that are highly dependent on tourism.

“In summary, the climate of freedom, fear, uncertainty and mistrust already prevails outside the Atlantic, and we see that the EU is involved in discussions about the effectiveness of vaccines and quarantine measures,” concludes Ž. Mauricas.

Exclusion is growing in the EU

Continued restrictions on quarantine and the free movement of citizens in the EU are widening the gap between different economic sectors and between the northern and southern EU countries that depend on tourism. Uneven economic development may slow down the overall growth of the EU economy, and growing disparities between countries will reduce the likelihood of agreeing on additional economic stimulus measures in the future.

The amounts of budget deficits and public debt of the “Four Quartet” countries (Sweden, the Netherlands, Denmark, Austria) in 2021. and 2022 will be significantly lower than in the southern European countries, and it is questionable whether the quartet will consent to additional economic stimulus measures in the future without additional conditions.

The quarantine restrictions will hit the highly developed tourism sector in southern European countries, which make up a significant part of their economies, particularly hard.

The widening gap between North and South Europe is therefore likely to persist during this crisis, with the approval of € 750 billion. A European Recovery Fund of € 1 billion will not be enough to reduce these disparities.

FM’s forecasts are more optimistic

Ministry of Finance (MoF) March 9 announced that if vaccination is accelerated in the middle of the year, Lithuania will prevent the outbreak of new strains of the virus, the economy will open up and exports to the EU will recover, the country’s economy could grow 2.6% this year and around 3.2% next year.

This year’s forecast, compared to December last year, was lowered by 0.2 percent. points (it was 2.8%).

According to the Finance Ministry, the recovery is likely to begin in the second quarter of this year.

“Speeding up the public vaccination process is not only a stabilizing factor for the health system, but also for the world economy. And although Lithuania has experienced one of the mildest economic recessions in Europe during this pandemic period, uncertainty about the future persists. This year, the Lithuanian economy is expected to return to a growth path that is likely to increase in the medium term, but the pace of recovery is highly dependent on new epidemiological trends, ”said Gintarė Skaistė, Minister of Finance.

The FM’s updated macroeconomic forecast scenario indicates that after declining last year from 2021 onwards. Domestic demand is expected to begin to recover, and increased household consumer spending and investment (gross fixed capital formation) will be the main drivers of the recovery.

At the same time, negative risk factors persist. These include outbreaks of new strains of COVID-19 and stricter measures to control them, delay in the implementation of mass vaccination plans, potentially irresponsible public behavior, slower recovery in the euro area and the global economy, fluctuations in financial markets. world and geopolitical tensions.

There are also positive opportunities, such as rapid and effective mass vaccination of the population and new treatments for COVID-19, stronger domestic and external demand, monetary and fiscal policies conducive to economic growth, the Economic Resilience and Recovery Fund (FRR). ) of the EU and its effective implementation, better demographic trends.

Write a comment