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Žygimantas Mauricas, chief economist at Luminor Bank, noted that the prolonged quarantine will have negative consequences for the Lithuanian economy: the number of corporate bankruptcies and unemployment will rise.
“In addition, each day, week and month of quarantine costs the Lithuanian budget. Not only is there no tax revenue, but also downtime and subsidies are increasing. There is also an increasing likelihood that more budget money will be needed to address the consequences of quarantine.
So, the longer the quarantine lasts, the more the public debt will grow and the slower the economic recovery will be when the quarantine ends ”, explained the economist.
Still, he said, the quarantine has a snowball effect.
“If it’s short, the economy will recover very quickly. We saw this in the spring, when Lithuania was one of the first to ease the quarantine and create a travel bubble with the Baltic countries. And the countries that lagged, like the Kingdom. United, they had a short post-quarantine recovery period. Therefore, before the time of recovery, the second quarantine had to be closed, “Ž said. Mauricas.
However, to name a specific date that should end, the quarantine economist did not dare to name. According to him, epidemiologists should assess the situation and decide.
“People are intimidated by uncertainty, so it would be better if they didn’t have to go back to it after quarantine. What matters is not what restrictions are imposed, but how people adhere to them. The longer the quarantine is. “Fewer people will want to abide by those restrictions. Shadow activity emerges. After all, people are already looking at each other’s hairstyles and suspect they are being illegally clipped.”
And in the case of shadow activities, the gap increases between those who engage in those activities and those who are honest. In addition, the state budget suffers because taxes are not paid during parallel activities ”, Ž. Mauricas.
The most important thing is to manage the crisis and then count the money
Indrė Genytė-Pikčienė, chief economist at INVL Asset Management, said the length of the quarantine is not a question of money.
“The first goal of the quarantine is victory on the health front, reducing new infections and controlling the second wave of the pandemic.
The cost of quarantine terminated or relieved prematurely is very high. We could even contract a third wave of coronavirus. And the government cannot afford it. So there will certainly be no rush with quarantine releases. This will be done little by little ”, explained the economist.
From a financial point of view, the conditions are created so that there is enough money.
“Central banks are creating a low-interest environment for governments to borrow on concessional terms. The European Commission and other institutions emphasize the need to tackle a pandemic first, and only then think about debt sustainability.
Therefore, as long as the pandemic fire is not extinguished and the international conditions are very good, it is necessary to take advantage and make efforts to control the situation. It would be healthier for the economy to recover once it fell again. After all, if the restrictions are released too soon, it may be necessary to reintroduce a strict quarantine in the spring, ”noted I. Genytė-Pikčienė.
In addition, according to the economist, the companies most affected, although with delay, are already receiving state aid. This should reduce the losses from the pandemic for the Lithuanian economy.
“Of course, we will not avoid bankruptcies, but we will see the real number after the end of the pandemic. Currently, companies are still trying to survive thanks to state aid. But we may see a jump in bankruptcies in the spring. Unemployment is also increasing and we will see its peak in the first half of this year.
However, if we compare it with other countries, we will see that our economic structure is more resistant to quarantine. For example, in Italy and Spain, a large part of the economy consists of the tourism, catering and accommodation sectors, ”commented I. Genytė-Pikčienė.
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Tadas Povilauskas, an economist at SEB Bank, said that in this situation, the conditions for the relaxation of the quarantine must be dictated by epidemiologists and the health sector.
“The main objective is to prevent human death. And if the health sector can no longer support the number of patients, then the decisive word must be given to health professionals.
Of course, business must also be heard, but there should be no rush to go back to the third quarantine. Furthermore, the first quarantine did not end immediately. The restrictions were released little by little. Now a similar scenario can be expected. The restrictions are likely to ease during February and March, “predicted the economist.
According to him, the state still has the resources to help businesses. However, attention should be paid to and help those residents who suffer the most from the quarantine.
“The self-employed are currently experiencing difficulties. These people receive 260 euros during the quarantine and are really concerned about each month of quarantine. Therefore, state aid should be directed to these people,” said T. Povilauskas.
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