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The EU is a loser in a pandemic
Sigismund Mauricas, an economist at Luminor Bank, described the European Union (EU) as a loser from the pandemic on News Radio because other major world economies, the United States and China, are doing much better. There are many reasons for this.
“The first and foremost reason is the slowness of the vaccination company. About a third of people in the US have already received their first dose of the vaccine, compared to only about 10% in the EU. It exists. a serious risk that quarantine restrictions will continue as a result, and likely for weeks rather than weeks.
There is already talk of another lost summer. If it is lost, it will be a severe blow to the EU, as southern European countries are heavily dependent on tourism. Because we are sitting in the same boat, overall growth in the EU will be slow this year. The growth of the EU will move next year.
Another reason is the size of the economic stimulus package. The United States has approved 1.9 trillion. bundle of dollars and now we’re talking about an additional 3 trillion. investment program in dollars. At that time, the EU has only 750 billion. recovery fund ”, explained the economist.
This is to blame for the EU decision-making principle, which is much more complex than in any other country. All countries have to decide on support and the proposal must be approved, but according to Maurice, the economic quartet is often opposed: Sweden, Denmark, the Netherlands and Austria. Some countries need financial help, others don’t, which is why disagreements arise.
A prolonged quarantine will lead to bankruptcy
According to Luminor’s latest forecast, Lithuania’s gross domestic product (GDP) in 2021 will grow by 1.8 percent. This is a sad number, because before the pandemic, Lithuania’s GDP grew by around 3.5 percent.
According to J. Maurice, the fault lies with the long quarantine. Last spring it lasted about 2.5 months, and this year, from November 7, and it is not clear when it will end. This has severely affected businesses, preventing the economy from recovering quickly.
“Last spring we had a V-shaped recession and a subsequent recovery. There was a lot of uncertainty, everyone was in the same boat, so everyone fell, even the IT sector. Then everyone went back to pre-pandemic levels, even restaurants. and tourism We had a good summer.
Now we have a recession in the form of K. Consequently, part of the sectors, such as industry, transport, information technology, part of commerce, did not even feel the crisis. Other parts, such as the restaurant sector and hotels, fell much more than during the spring quarantine of last year, “said Maurice.
Jekaterina Rojaka, Head of Business Development and Strategy at Creditinfo Lietuva, confirmed that it is the catering sector that is exposed to the highest risk of bankruptcy. Although the transport sector is associated with very pandemic exports, even the risk of bankruptcy increases moderately. J.Rojaka also warns of a possible wave of bankruptcies.
“The bankruptcy situation in Lithuania has improved since 2019. This trend did not stop last year either. The number of bankruptcies of legal entities was decreasing and temporary injections of liquidity granted during the pandemic allowed debts to be paid off more quickly. .
On the one hand, this is optimistic, on the other hand, this trend may not be very sustainable and misleading. By the end of this year, we can already see a growing number of bankruptcies. Everything will depend on state support, how long and with what intensity we will give the respiratory apparatus to the companies, how much financial liquidity we will give them, “he explained on radio Žinių.
Rojaka also emphasized that the overcrowded quarantine increases unemployment, which is currently gaining momentum and is growing by about a percentage point every month.
According to her, it is unlikely that unemployment will stop rising this year and the situation will depend on the rate of vaccination, as well as how and when the businesses that are currently completely closed will open.
Prices will go up
Next year 5.5 percent is forecast. GDP growth, which reaches 2 percent. more compared to the pre-pandemic level. According to Maurice, as GDP grows, so will prices.
“The risk of price increases is high, but only in certain categories. Possibly the service sector will try to make up for lost time. We will see that when we return to restaurants and entertainment venues. The same happened last summer.
Also, some companies will have already left. For example, there will be no more restaurants than before the crisis, let’s say only about 80 percent will remain. restaurants. Consequently, the demand will be very high in the short term. We will go to the restaurant on Friday night and ask if there are free tables, and they will tell us there aren’t, ”he drew a possible situation.
Home appliance companies are already saying their products will go up by about 20 percent. Although J. Mauricas does not believe that the price will jump so sharply, according to J. Rojaka, everything can be expected, and they even named the reasons for it.
“Prices are going up not only because sellers of household goods want to make money. Raw materials are becoming more and more expensive: metal, copper, as well as energy resources, transportation costs.
Competition also affects prices. Now it is more expensive to bring goods to Lithuania from China or Korea. This can contribute to the growth of inflation, “said J. Rojaka.
Inflation would also raise the prices of essential goods. However, J. Rojaka also emphasizes the services provided during the quarantine: “We talk little about hidden inflation. It is in the quality of the service. For example, we pay for educational services as much as we used to, but the quality of services is now, in many cases, lower. “
Therefore, it predicts that the prices of services that are currently delivered remotely and will be delivered live again after quarantine will increase as their quality improves.
The price of real estate will grow faster than wages
According to J.Muric, the real estate market hardly suffered during the pandemic, which was obviously seen during the second quarantine, when the number of transactions exceeded all expectations, and the number of new apartment sales in Vilnius even broke records.
“Everyone buys real estate like crazy. This is due to the change in consumer behavior, since many work from home and spend more time at home. For them, those houses are boring and there is nowhere to spend the money: not even for the leisure or for restaurants.
People are saving and are afraid of rising inflation and depreciation, so they want to invest in real estate ”, explained the economist, noting that now two trends have been observed: buying more houses than flats and losing popularity due to more space.
As you said, there are more people willing to buy a house than to bargain, so there is a great incentive to raise house prices. However, in Lithuania there is a need to improve housing affordability and house prices need to grow more slowly than wages, although the situation is different.
“Real estate prices are growing too fast,” Maurice summed up, noting that real estate is no longer an attractive way to invest because yields are falling around the world.
