Economists: Brexit is no longer a big threat to Lithuania

According to them, Lithuania is currently more seriously threatened by other problems: first, the coronavirus pandemic, which did not significantly slow down the country’s economy, but affected the most important export markets more severely.

The issue of Brexit is certainly not at the top of the agenda, as there are more serious issues. The UK itself must ensure that the agreement reached is as close to the current situation as possible, ”Indrė Genytė-Pikčienė, chief economist at INVL Asset Management, told BNS.

According to her, although the Lithuanian economy is extremely open and dependent on exports, the UK’s dependence on foreign trade is not very high.

“Now there are many more problems and tensions and other threats are more relevant. They can change that scenario in the negative direction much more significantly, because we see that the core markets (export – SNB) are facing certain difficulties, ”emphasized I. Genytė-Pikčienė.

Tadas Povilauskas, an economist at SEB Bank, says that fears about the UK’s exit from the EU remain the same. However, according to him, since the start of the Brexit process – the referendum on the UK’s exit from the EU took place more than four years ago – so long has passed that even withdrawal without a deal will no longer shock the Lithuanian economy. .

“The fears are the same: that the UK will become a third country, that there are procedures related to customs declarations, food quality requirements,” T. Povilauskas told BNS.

“Which is good: Most companies did their homework better or worse last year, which would be the case. I don’t think the workforce will be gone in a year. Maybe even a little better than those years have gone by and now we can’t really speak of shock or surprise, ”he emphasized.

I. Genytė-Pikčienė also says that companies and business sectors dependent on the UK market had sufficient time to plan activities according to various scenarios.

“We even had some specific economic activities in the industry that were more closely related to the UK, but apparently they were already considering those alternatives and prepared for every possible case, because it really didn’t happen very suddenly and we were able to adapt accordingly,” INVL said. Asset. Management economist ”.

According to T. Povilauskas, SEB economists currently estimate the probability of a hard Brexit at 50:50. According to the economist, it is feared that political rather than economic reasons will prevail in the negotiations.

“The UK is very affected by the coronavirus and should not have a second problem in 2021, because it is clear to companies that this is a bad scenario,” said Povilauskas.

“It is in everyone’s interest that one agreement or another is at least a free trade agreement. But there are conservatives with a large majority, there is Boris Johnson (Prime Minister – BNS), who wants to be famous in history ”, he said.

Johnson threatened to withdraw from talks on new trade relations between the UK and the EU over the weekend if no deal is reached before the EU summit on October 15.

The stalemate has raised fears that Brexit could take place after December 31 without a deal, in which case most trade would be regulated by the rules and tariffs of the World Trade Organization (WTO). After the New Year, tariffs and other economic barriers would emerge between the UK and the EU.

The share of exports of goods of Lithuanian origin to the UK in the structure of Lithuanian exports has decreased from 6.1% since 2016, when the Brexit referendum was held, to 2019, to 5.2%, according to the Department of Statistics. According to the Bank of Lithuania, the share of services exports to the UK is even lower: about 4 percent.