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The formation of next year’s state budget will depend at least in part on the forecasts, and will be taken into account when establishing the monthly minimum wage. It also depends on the forecasts, among other things, on the degree to which old-age pensions will be indexed next year.
According to V. Šapoka, the pandemic struck and caused a shock worldwide. What is happening abroad is important to Lithuania, because our economy depends on exports abroad. The Minister revealed that the expected contraction of the economy of our country this year will reach 7%.
“Although we are seeing signs of recovery, we do not yet expect that in 2021. It will be able to restore the losses caused this year by the COVID-19 pandemic. The gross domestic product at constant prices will be close to 2019. Only in 2022, and the labor market will not. will fully recover in the medium term.
Therefore, it is now essential to effectively implement measures that promote economic recovery and growth: rationally and efficiently investing our state and EU funds so that projects financed by them create quality long-term jobs, provide opportunities for recycling and restore Lithuania’s stable financial position, “said V. Šapoka.
Deputy Finance Minister Miglė Tuskienė emphasized that the economy is stabilizing and recovering. According to her, the economy will grow 6% next year, but only in 2022. it will reach pre-crisis levels.
It is true that, in the worst case, the decrease could reach 16.8 percent. According to V. Šapoka, the pandemic has not disappeared, the risks have not disappeared, so we must be prepared for the worst case scenario.
The Vice Minister emphasized that the Lithuanian economy is more dependent on exports and domestic consumption. Export markets will not recover in the near future, so much will depend on domestic consumption.
Impact of COVID-19 on the labor market
The Ministry of Finance indicates that the COVID-19 virus pandemic and the restriction of economic activity also had a negative impact on the labor market. This year, the country’s unemployment rate is likely to rise to 9.5 percent, and the employed population will decline to 2.8 percent.
Government subsidies to business for downtime and support for the self-employed, as well as the ability of companies to adapt to unusual pandemic conditions, are expected to have a positive impact on employment and employment.
In 2021, as economic activity recovers and labor demand increases, the unemployment rate will drop to 8.1 percent. (In the following medium-term years, it will decrease more slowly and will rise to 6.6% at the end of the medium term).
Salaries: growth will slow down
Wages (DU) are expected to increase in 2020. It will grow further in the public sector. In the private sector, wage growth will slow down for some companies due to a decrease in supply and demand, announced downtime and, at the same time, a temporary decrease in demand for labor in Lithuania.
However, the loss of income for the most vulnerable workers will be limited by the government’s economic stimulus measures, support for companies affected by the COVID-19 pandemic and an increase in the monthly minimum wage from the beginning of this year.
This year, the country’s average monthly gross DU is expected to grow 1.8 percent, and in 2021 the growth rate will reach 3.3 percent. In the following medium-term years, with the fall in the unemployment rate and the strengthening of labor demand, the DU growth rate in the country will gradually accelerate and will approach 5% at the end of the period.
Suppressed price growth
The average annual inflation in the country in 2020 will decrease to 0.7 percent. A decrease in the prices of basic energy products is not expected in 2021, therefore, the inflation rate will accelerate to 1.7% and, at the end of the medium term, to 2%.
Strong risk factors remain
The external environment will remain volatile in the medium term, and prospects for economic recovery for Lithuania’s main foreign trade partners are fragile.
At the time of writing this article, the development of the COVID-19 virus in the world was not controlled, so there is a risk that the countries of the world will again have to apply measures that have a negative impact on the economy to control their outbreaks.
The risk of “hard” Brexit, which may have negative economic consequences for the EU and Lithuanian economies in the medium term, has also not disappeared. There is a risk that the conditions of international trade may change.
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