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The confidence indicator has fallen
Swedbank chief economist Nerijus Mačiulis told the Lithuanian Business Forum that Lithuania’s expectations had fluctuated. According to him, the confidence indicator of all commercial representatives and consumers fell very clearly in April. However, it has been and worse, since the indicators have not fallen to a level as low as in 2008-2009. The confidence indicator in the service was the one that fell the most.
“What is not yet known and what is not fully reflected in the confidence indicators is how negatively the Lithuanian industry will be affected, because so far there has been nothing terrible in the first quarter. Production grew by more than 3 percent percent. Perhaps with the opening of export markets in the EU and other countries, Lithuanian industry will not suffer much. However, I think that industry is the second negative shock that we will see in Lithuania, “said the economist at the Business Forum from Lithuania on Thursday.
What will be the impact on the real estate market?
Speaking about the real estate market, N. Mačiulis says there were very few transactions in March-April.
“By monitoring ads on real estate portals asking for the prices of rented and sold houses, the price of rent, which responds most quickly to any change in the world, is already in April. It decreased significantly in all cities. The rental price was further reduced, almost a tenth, in the old town of Vilnius, “he says.
According to the economist, the real estate market clearly depends on expectations. Although N. Mačiulis does not forecast a sharp drop, he estimates that house prices may drop a tenth this year.
The Lithuanian economy is much better prepared than in 2009.
This will also be affected by the negative situation in the labor market and the deterioration of the expectations of the population. According to the Swedbank economist, the unemployment rate has now increased by 3 percentage points compared to the previous year, and is expected to increase slightly.
“Unemployment should not increase with the opening of sectors that were closed during quarantine. Currently, the transport and industrial sectors are more vulnerable, where unemployment may increase,” says the economist.
However, the economist says he does not believe the unemployment rate will rise to the 2009 level.
According to N. Mačiulis, the Lithuanian economy is much better prepared and more balanced than in 2008. Housing affordability index in all Lithuanian cities, at record heights. Over the past decade, wages have grown much faster than property prices, so he says the property market and the economy in general are not overheating.
This is also demonstrated by extremely well-balanced foreign trade: “Yes, for 2008, there was a huge foreign trade deficit during the crisis and all the Baltic countries did not live up to their potential, which led to a record foreign trade surplus in Lithuania: much more is exported than imported. “
Looking at the finances of companies and individuals, the situation is healthier, because there is a record number of deposits, the loan portfolio did not grow as the deposit portfolio grew, making the financial pillow much larger N. Mačiulis points out.
Nerijus Mačiulis
How will Lithuania’s GDP change in the second quarter of this year?
Swedbank chief economist says annual GDP growth slowed to 2.5 percent in the first quarter. This is a good situation compared to many eurozone countries. But the second quarter, as the economist predicts, will not be as rewarding.
“By evaluating the changes in payment card payments and the loan portfolio, monitoring the unemployment rate and electricity consumption, we forecast that Lithuania’s GDP will decrease by about a tenth in the second quarter. This is not very dramatic, especially if we believe it will be a single localized contraction in the second quarter, and that it will still be possible to observe the increase from the well. This is the most likely scenario, “predicts the economist.
He says he sees signs of such a scenario: the recovered electricity consumption and other available data demonstrate this.
He gives the example of how payment card payments in all the Baltic countries have changed: “Since the beginning of this year, growth has been observed, with the start of quarantine. This is the total cost of paying with payment cards, excluding food and other purchases in supermarkets. (…) The biggest drop was where there was no economic activity: airlines, hotels, restaurants. “
N. Mačiulis also notes that food and other expenses in supermarkets have increased by about a quarter compared to the same period last year.
At the same time, when evaluating the costs of household items, garden supplies, and electronics, the past two weeks have seen an increase compared to the same period last year.
However, total costs at service locations and supermarkets have decreased by a small percentage compared to the same period last year.
The economist noted that during the quarantine, more than 50 percent. increased betting and gambling costs.
The biggest concern is how the outlook for exports will change.
“It appears that the bottom line has already been reached in terms of consumer costs. We have seen a significant recovery in some costs, and will continue to monitor it as services recover. The biggest concern is not the change in domestic demand, but the change in Lithuania’s export prospects, which will be bleak in the near future.
We believe that the worst situation for the Lithuanian economy will be concentrated in the second quarter. We will see growth in domestic demand, with the blackest background in the past. We see a recovery when we track payment card payments.
Changes in Lithuania’s GDP will be similar to or less than the decline of the euro area economy, in contrast to the previous crisis, when the Baltic countries stood out with a particularly sharp decline. This time we will be positive examples of how states have adequately dealt with the crisis and have not mishandled it at all, ”N. Mačiulis shared his predictions on Thursday.
Mauritius: we currently have three crises
Sigismund Mauricas, Luminor’s chief economist, agrees that the economic recovery will be much faster than in 2009.
According to Ž. Maurico, we currently have three crises: health care, liquidity, and bankruptcy and unemployment.
“The health care crisis was caused by the virus epidemic, which is said to be managed well enough.” In Lithuania, we practically had crises like the one we had, because we anticipated events on time, we introduced quarantine, therefore, the number of cases was not great, “says the economist.
However, the quarantine caused a liquidity crisis. During quarantine, it is observed that people buy food in different places. In March, retail food sales increased 6 percent, while restaurants and coffee shops fell 45 percent. Therefore, according to Ž. For Maurico, for restaurants and cafes, this is a liquidity crisis because quarantine prevents operations.
Sigismund Mauricas
As he points out, this becomes a problem when those changes are irreversible. Then we move on to the bankruptcy and unemployment crisis.
“Currently, the unemployment rate is increasing, in April. We have 11 percent. Unemployment rate,” says the economist, pointing to a growing trend.
“On the face of the liquidity crisis, we are not doing as well, we did not have mechanisms in place like Switzerland, which distributed 20 billion. EUR. Business. Lithuania has tens of millions of support, so we are falling behind “says the economist at Luminor.
According to him, the essence is the third stage: the bankruptcy and unemployment crisis, which is surrounded by a thick fog. It is difficult to predict the situation, because nobody knows how the scenario will unfold.
The narratives of the past and this crisis are different.
Ž. Maurice compared 2008 The narrative of the crisis with 2020: “This time we did not cause the crisis, but the mystical virus, so there is no reason to blame ourselves or others. (…) The narrative of tightening the belt has been replaced by an economic stimulus, which is crucial to support at least this year. Certain groups in society are not breaking their belts, say retirees, the unemployed, who receive state support so that the bankruptcy traps are not dug and the unemployment crisis is not escalated. “
The business narrative, he said, is also different: Businesses no longer talk about the need to cut wages, now most say it is an opportunity to invest in their business automation or IT systems that would facilitate distance selling of goods. and services. This is said to give us hope of avoiding a massive drop in wages.
This time we will be closer to the Germans and the Spanish.
According to the economist, the Germans avoided rising unemployment in 2008. The situation in Lithuania at the time was extremely dramatic: the unemployment rate increased by 8%, and in Spain by 6.6%.
At that time, the International Monetary Fund in 2020. For Lithuania, only a small increase in the unemployment rate is forecast (2.6%), for Spain, a rather drastic situation (6.7%). However, this time Lithuania is closer to the Germans, whose unemployment rate will rise only 0.7 percent.
“The unemployment rate has increased several times in a few years, and it takes eight years to restore the unemployment rate. What we lose in a month will take 4 months. At the same level,” explains the economist.
According to Ž. Maurico, at this time of recovery, it is crucial not to go astray, to keep the economy open to trade, not to increase state regulation, especially over-regulation. It’s also important to avoid wasting stimulus money: if money is left, it should be returned to the budget.
The economist also points out that increasing redistribution is not the right way for Lithuania, because we can expect a Greek scenario. It is also necessary to control the growth of shade and corruption.
If we follow all this, Ž. According to Maurico, there is a high probability of emerging from the crisis with a loss less than the EU average.
“If the economic recession is greater, it will mean that we did something wrong again,” concludes Ž. Mauricas
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