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On Tuesday, the conclusion of the Supreme Audit Institution on the economic development scenario for 2021-2024 prepared by the Ministry of Finance was published. “There is a risk that the scenario will not materialize due to changes in internal and external conditions that lead to a significant change in the economic situation,” he said.
Low recession, high unemployment
The conclusion establishes that the impact of COVID-19 on the Lithuanian economy in 2020 was ambiguous: on the one hand, the fall in gross domestic product was one of the smallest in the European Union, and on the other hand, the change in the La unemployment rate was one of the highest.
“In 2020, the Lithuanian economy was among the least affected by COVID-19 in the EU: real GDP decreased by 0.8 percent (EU average 6.2%). This was due to increased demand of chemical industry products (diagnostic and laboratory reagents), high agricultural yields and increasing exports of food, beverages and tobacco products. The unemployment rate in Lithuania in 2020 was one of the highest in the world. EU and reached 8.5 percent (EU average – 7.1%), “the document reads.
As Jurga Rukšėnaitė, advisor to the Budget Policy Monitoring Department of the State Audit Office pointed out, the acceleration of the public vaccination process is not only a factor that stabilizes the health system, but also the global and Lithuanian economies.
“Once the pandemic is under control, the savings accumulated by the population and companies in 2020 would stimulate consumption and, most importantly, investment from the private sector. A successful channeling of financial resources for economic transformation would also benefit economic development in the medium term, ”he said.
Other risks
According to the specialists of the State Audit, there are more risks that the economic development scenario will not materialize.
“The Lithuanian economy may be adversely affected by risks related to the recovery of the world economy after the pandemic, external demand and the geopolitical situation,” the conclusion states.
In the economic development scenario, 2.6% is projected in 2021 and 3.2% in 2022-2023. GDP growth driven by recovery in domestic consumption and investment. Furthermore, anticipating the recovery of the economies of Lithuania’s main trading partners, the country’s real exports of goods and services are projected to grow in 2021-2023.
Average gross monthly earnings will grow faster than inflation. The deterioration of the demographic situation in Lithuania will have a negative impact on the employed population in the medium term.
The State Audit Office, which performs the functions of a fiscal institution, updated the temperature diagram of the Lithuanian economy. The forecast for the first quarter of 2021 presented in it shows that the temperature of the Lithuanian economy will correspond to the average level of 2020, but will remain lower than in 2017-2019.
Lithuanian Economy Temperature Chart
© State Audit Office
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