The pandemic will affect the economies of all EU countries: countries that attracted migrants can face the crisis much worse

A. Pranckevičius says that the EC’s conclusions should not be surprising. It is already clear that the parties will do it differently.

“It just caught our eye then. We all know that a major economic recession is coming. Those figures are the first, they are probably not completely accurate yet, as they show only in March, we will see when the April figures will be, but we can already see that the European Union (EU) will experience the biggest recession in its history 7.7 percent

Next year, we expect the economy to grow 6 percent again. This means that the recession will be severe and painful, but the recovery should also not take long, especially if states make significant use of an unprecedented economic stimulus program and manage unemployment, which is increasing but may increase less than in 2008. / 09. The problem is that Europe is very different and treats not only the pandemic, but also the economic crisis differently, therefore countries are coming out of the economic crisis differently, “says A. Pranckevičius.

When to expect recovery

N. Mačiulis also evaluated the EC forecast and assures that the GDP will decrease approximately ten percent in the second quarter. According to him, recovery can be expected in the second half of this year.

“We are facing a crisis that we did not have in modern history, which was not described in economic textbooks, basically economic history is written, so there is not much clarity in this context.” We already have a good idea of ​​what the second quarter of this year will be like when we look at various indicators such as electricity consumption, credit card payments and rising unemployment.

We understand that GDP will decrease approximately ten percent in the second quarter, but with the end of the quarantine in Lithuania and other EU countries, a recovery can already be expected in the second half of this year, especially given monetary policy. very favorable from the European Central Bank (ECB). both low interest rates and an increase in the money supply.

Almost all countries apply fiscal stimulus measures, increase budget deficits, sometimes reduce taxes, increase social benefits and help companies. We believe that there will not be such a big drop, as predicted by the European Commission, but the most interesting thing is that Lithuania does not differ from the European Union, especially from the eurozone countries. We even think that the Lithuanian economy could shrink a little less than the eurozone this year, compared to 2008-2009, ”says the economist.

The blackest period is over

However, N. Mačiulis does not believe that Lithuania is doing worse than its neighbors, as noted in the EC conclusions. According to him, the Lithuanian economy currently occupies better starting positions than Latvia or Estonia.

“Our economists do not believe that the contraction of the Lithuanian economy is greater than that of Latvia or Estonia. From the perspective of the structure of the economy, both the foreign trade surplus, the balance of companies, the population and the indicators of competitiveness show that we are in a better starting position than neighboring countries. Perhaps one of our weaknesses is that the government bailout plan is being implemented rather slowly, especially with loan guarantees. Now only 3 percent has been distributed of the beautiful one billion euros, ”explained N. Mačiulis.

According to him, in a sense, the blackest period has already passed, but the transport sector expects a challenge.

“I will repeat that, looking at payment card payments, credit volumes, it can be said that at least in terms of domestic demand, the darkest moment is the past. Now, the greatest uncertainty is how the credit sector will be affected Lithuanian transport and exporters, as the entire euro area is going through a deep recession, in this case the European Commission and European leaders, who are currently negotiating the aid package, have an important role to play, “says the economist. .

We are now seeing some of the problems more clearly.

Speaking about unemployment, A. Pranckevičius emphasized that the pandemic only highlighted this injury in Lithuania.

“That growth in unemployment already comes from a relatively high current percentage of almost eight. This shows that there were structural problems before the pandemic, they have not been solved, so in terms of social exclusion, poverty, which we are all talking about Over the years, if the situation were bad before the pandemic, the pandemic could exacerbate these problems.

It is important that support reaches the most vulnerable groups as soon as possible: people suffering from unemployment, as well as the most vulnerable sectors: food, leisure, travel, agriculture and fishing. For all sectors, the Commission presents aid packages with clear programs. So states are already directing support for those sectors. In principle, the situation in Lithuania is similar to that of other countries, the most important thing is to get out of this crisis without increasing social exclusion and inequality and provide assistance as soon as possible, “says A. Pranckevičius.

Waves of emigration are not expected

When asked by the economist N. Mačiulis if all the problems listed may mean that people will simply want to escape from Lithuania, the interlocutor says he sees no reason for that. According to him, some countries that have been attracting immigrants in this way for many years may be much worse with the crisis.

“The scenario is unlikely, as the unemployment rate is not expected to increase as much as in 2008-2009. Then it reached almost twenty percent. We predict that now those thirty thousand new unemployed, probably most companies have quit to those workers who saw that it will not be necessary this year. There may still be problems in the industrial sector, but there really cannot be the same jump in unemployment. Another aspect, as the EC data shows, is that one can expect a economic recovery next year, and perhaps later this year.

This means that new jobs will be created, unemployed people can be integrated into the labor market in Lithuania, so they will not have to look for work abroad. The third is that there are many popular destinations for migrants who are likely to experience a greater recession and higher unemployment. An example would be Norway, where unemployment has increased the most since World War II. It will definitely not be an attractive country for Lithuanian emigrants, so we believe that there will definitely be no emigration leap this year, similar trends may remain as in recent years, “says the economist.

Let us be afraid of falling prices, not of rising prices.

It is true that many people fear that prices may rise soon and then worsen some people’s lives. However, according to the economist, something more must be feared.

“Low inflation is a big problem. As far as the economy is concerned, this is a reflection of the big problem: lack of demand. This is a situation where companies in some cases are forced to reduce prices, when they don’t have anything to raise wages, create new jobs. In these circumstances, we must be sad that only that inflation exists.

Let’s look at fuel prices at service stations: prices are falling everywhere. This is an example of the lack of demand that needs to be addressed, which is why the ECB prints money like never before, sets negative interest rates, and the EC is likely to offer a trillion euros to raise prices, increase inflation, create resources for wage growth and employment. to create places Let’s understand that the problem now is not inflation, but deflation: let’s be afraid of falling prices, not of rising prices, “says the economist.

EC forecasts

The EC predicts that despite a rapid and comprehensive political response, the EU economy will experience a historic recession this year, both at EU and national level.

You can read more in this text: the EC has provided the latest forecasts.

2020 The EC’s spring economic forecast indicates that the euro area economy will shrink by a record 7.7 percent in 2021. It will grow by 6.3 percent. In 2020 the EU economy is projected to shrink by 7.4% and in 2021. to grow by approximately 6.1 percent. Economic growth Forecasts for the EU and the euro area have been lowered by around nine percentage points compared to 2019. Autumn economic forecast. The pandemic has undoubtedly affected all member states, with a contracting economy of -4.3%. In Poland, down to -9.7 percent. In Greece The EC forecasts that in Lithuania in 2020. GDP will fall 7.9% and in 2020 it will grow 7.4 percent.

“The macroeconomic forecasts of the European Commission are close to the economic development scenario prepared by the Ministry of Finance in April this year, which predicts that in 2020 it is expected to exceed 7%. Decrease in GDP. To mitigate the effects of the pandemic in the Lithuanian economy, we are implementing a stimulus plan, the importance of which for economic recovery has also been evaluated by the European Commission. We all hope that our country’s economy will recover in the coming years, “says Minister of Finance Vilius Šapoka.

According to the Ministry of Finance, the EC forecasts that the Lithuanian economy will suffer the most damage in the second quarter of this year, and a rapid recovery is expected in the third quarter. Domestic demand will be negatively affected this year by declining household incomes and limited access to credit. The recovery of exports will depend on the economic development of the Nordic countries.