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In Lithuania, the problem that has worried many people in recent years has been turned upside down. After much discussion about how Lithuania will live after the EU’s net support has decreased by almost a quarter, we can now see that in the next seven years Lithuania will receive almost double euros than in 2014-2020.
Such unprecedented distributions of money were sparked by the Covid-19 crisis. In many countries, this pandemic and quarantine has brought at least a half century of unprecedented economic decline. Getting out of the crisis will not be easy for many countries, even if the virus does not cause as much humanitarian and economic harm in the second half of the year as it did earlier this year.
In this context, the Lithuanian economy has so far been pleasantly surprised by its separation from the most affected EU countries. According to the Department of Statistics, retail sales in May were already slightly higher than a year ago. According to Swedbank, payment card payments show that household consumption continues to gain momentum and leaves the manifestations of the crisis in the past.
Lithuania will receive almost double euros than in 2014-2020.
Only the prospects for exporters seem sadder: in May this year, the value of exports of goods of Lithuanian origin (excluding petroleum products) was almost a fifth lower than in the same period of the previous year. And although export orders have already risen slightly from below, prospects for foreign demand-oriented producers and service providers are not picking up as fast as household consumption.
The registered unemployment rate in Lithuania increased by approximately 2 percentage points during the quarantine, and did not increase at all from May to mid-June. However, since mid-June, the unemployment rate has started to rise rapidly again, with almost 15,000 more registered with the Employment Service. unemployed. Does this mean that the worst is yet to come and that EU support and loans will come to us in time?
The increase in registered unemployment is likely due to the fact that many people who have so far not been in the job market and who have not sincerely sought work have registered only to receive a new benefit.
It would not be correct to think so, since the increase in registered unemployment is not due to lack of work. Rather, we have witnessed rapid job growth for more than a month. According to data from the Ministry of Social Security and Labor, 13.6 thousand have been laid off only since the beginning of July. employees, but they hired up to 32.4 thousand. workers
As a result, the increase in registered unemployment is likely due to the fact that many people who have not been in the job market and have not sincerely looked for work have only registered for a new benefit, with an allocation of € 200 for applicants of paid employment since mid-June.
Therefore, Lithuania is certainly not among the countries that have suffered the most from the virus and whose economies will be most affected: consumption has already returned to the pre-crisis level and employment is growing rapidly. Many export companies and their employees are likely to still need support, but the worst is in the past.
In other words, no additional funds are needed for short-term stimulation of domestic demand and recovery in consumption, but if the EU is ready to allocate a few billion more non-refundable to Lithuania, it would probably be rude to resign. However, they should not stimulate, revitalize or, worse yet, overheat the economy, but transform it. With such a sum of money, there is an opportunity to implement not only cosmetic or plastic surgery changes, but a complex transplant.
For example, in which European country do we think when we hear ‘luxury watches, banks and cheeses’? And what country do we think of when we hear about “the highest quality recreation, health and treatment services”? What is missing in Lithuania? How famous is Lithuania in the world today? What would you like and what could you highlight?
If the EU is ready to allocate an additional few billion non-refundable to Lithuania, it would probably be rude to resign.
Politicians and senior officials in many EU countries are currently focusing their efforts and efforts in the negotiation process to share the nearly seven billion EU seven-year budget and exceptional support. The most important task for Lithuania should be not to pull this sheet as much as possible, but to find ways to warm it up not only for a short time and not only for the chosen ones.
Having received unprecedented levels of support, the most important task for Lithuanian politicians, current and future governments and Seimas members is to raise funds to create long-term growth and prosperity potential, and not to be “absorbed” in the bad sense of the word.
Nerijus Mačiulis is the chief economist at Swedbank Lithuania.
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