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“Lithuania’s economy, compared to other European countries, has so far withstood the challenges caused by the pandemic quite successfully, but the deterioration of the epidemiological situation and tighter virus management measures may lead to a recovery. economic slower. On the other hand, the arrival of vaccines may create the conditions for a faster economic recovery, “said Finance Minister Gintarė Skaistė.
The economic development scenario of the Ministry of Finance foresees that this year the Lithuanian economy will contract by 1.5 percent due to the shock related to the crisis of the COVID-19 virus. In the coming years, gross domestic product (GDP) could grow by 2.8 percent, and in 2022–2023, by an average of 3.1 percent per year.
COVID-19 has had a negative impact on the labor market
The COVID-19 pandemic significantly worsened the labor market situation in the country. However, the second wave of the virus in autumn and the increased vulnerability of jobs in certain economic activities are lowering expectations about the prospects for a rapid recovery in the labor market.
The employed population will fall 1.9 percent this year and the unemployment rate will rise to 8.8 percent. Subsidies to companies for downtime and support for the self-employed, as well as the ability of companies to adapt to unusual pandemic conditions, have a mitigating effect on employment and employment.
In the first half of 2021, the second wave of the COVID-19 virus will have a negative impact on employment. However, later on, as economic activity recovers and labor demand increases in the service sector, the unemployment rate in the country will drop to 8.2 percent. In the following medium-term years, it will decline more slowly, reaching 6.6 percent at the end of the medium term.
The impact of the COVID-19 pandemic on the labor market will also slow down wage growth (UD). This year, the DU will be the one that will grow the most in the public sector. In the private sector, the evolution of wages will be less favorable for employees due to the decrease in supply and demand in the private sector, especially in accommodation and catering activities, and the announcement of downtime.
The country’s average monthly gross DU is projected to grow 9.3 percent, and in 2021, the growth rate will slow to 4.1 percent. In the following medium-term years, with the decline in unemployment and the strengthening of labor demand, the growth rate of depleted uranium will gradually accelerate and approach 5 percent by the end of the period.
Inflation
The global economic recession caused by the pandemic will affect both the national and global factors that drive price changes. This year, average annual inflation will drop to 1 percent. In 2021, the inflation rate will accelerate to 1.4 percent and, at the end of the medium term, to 2 percent, as there are no preconditions for a significant drop in the prices of energy raw materials.
Risk factor’s
The scenario developed under conditions of greater uncertainty. With the significant deterioration of the epidemiological situation in Lithuania and its main foreign trade partners in the fourth quarter of this year, the risk increased that the need for negative economic measures in Lithuania and the EU countries will take longer than in the past. last trimester to control virus outbreaks and overheating. , and labor market tensions caused by a pandemic, supply chain disruptions, and changes in business and consumer behavior may be more affected than expected in the scenario.
Important risk factors remain on the scene. These are the new leaps and bounds of the COVID-19 outbreaks, the deepest slowdown in the euro area and the global economy, the volatility of global financial markets, the development of protectionist demonstrations and geopolitical tensions.
There is also a positive risk that the vaccination of the population against COVID-19 will begin before the second half of next year, and the positive impact of vaccination on the real economy will be felt from 2021. The application of unprecedented measures To revive the EU economy, implementing reforms and investing in the medium term, it can stimulate the growth of the Lithuanian economy more than expected in this scenario.
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