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Finance Minister Vilius Šapoka, presenting the country’s macroeconomic forecasts for 2020 on Monday, said the situation is not dramatic and gives moderate optimism.
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“The fall this year should reach around 1.5 percent. And a sufficiently fast recovery next year – 3.3 percent,” said the minister.
Photo by Luke April / 15 minutes / Vilius Šapoka
Meanwhile, in the 2022-2023 period, the economy will grow 2.3 percent, according to the Ministry of Finance.
Deputy Finance Minister Miglė Tuskiended recalled that the ministry has significantly improved its forecasts for this year, as it forecast 7% in the summer. GDP drop.
“This led to the fact that we evaluated the actual results of 8 months of this year, we analyzed the expectations of consumers, companies and our main indicators for today,” emphasized M. Tuskienė.
The Deputy Minister stated that the Ministry of Finance provides only a forecast: it does not provide an alternative assessment of economic growth, because a central and realistic scenario is needed when preparing next year’s budget.
“The existence of these risks requires a safe budget that is in line with four principles: taking care of the most vulnerable, but at the same time curbing the growth of unnecessary spending,” emphasized M. Tuskienė.
Thinking ahead, she says, requires thinking about how to balance income and expenses so that debt stops growing and then returns to a downward trajectory.
Among the optimistic indicators are positive government consumption expenditures, which amortize the decline in GDP this year.
Juliaus Kalinsko / 15min nuotr./Miglė Tuskienė
M. Tuskienė added that the reduction of consumption costs and investments will have a negative contribution to the annual economic result.
However, the situation is different in different sectors. In particular, we are witnessing a rapid decline in investment in the transport sector, and investment in a sector such as information technology has even increased ”, highlights the deputy minister.
Luke April / 15min photo / Transport
Meanwhile, the last component of GDP, exports, will decline this year, but the decline in the main export markets for goods of Lithuanian origin, such as Germany, the Netherlands and Poland, is slightly lower than the average for the eurozone, where the fall will reach 15%.
Another reason that allowed the Ministry of Finance to improve its forecasts is the positive expectations of companies and consumers, the growth of retail production.
“August was the fourth consecutive month that consumer expectations improved and the economic rating index rose. In August, residents evaluated their financial situation or the economic situation of the country unchanged, but were willing to spend greater sums of money in more important purchases. This shows that the will to consume is really there, “says the vice minister.
Youth unemployment is the one that has increased the most
It is true that while sentiment is improving, a quarter of the population is affected by the coronavirus pandemic. This is also reflected in the unemployment figures, where the situation varies greatly by sector.
M. Tuskienė states that the total number of employed persons decreased by 2.2 percent in the second quarter and unemployment is 8.5 percent. The largest increase in unemployment is in the service, accommodation and restaurant sectors.
Photo by Ernesta Čičiurkaitė / 15min / Young employee
Unemployment increased more among young people: 15 to 24 years old.
“Youth unemployment has almost doubled to more than 20%. This is the most sensitive part of the population, these people work mainly in the fields of commerce and services”, explained M. Tuskienė why youth unemployment has increased.
Taking into account all the trends and the fact that the number of vacancies reached a record of more than 40,000 at the end of August, the Ministry of Finance forecasts that unemployment will be 8.8% this year and the number of employed persons will decrease by two%.
“It just came to our knowledge then. However, the unemployment rate will remain higher than in 2019,” emphasized M. Tuskienė.
Initial budget surpluses helped keep up
V.Šapoka believes that the best performance of the Lithuanian economy compared to other countries was determined by the fact that Lithuania had strong financial finances for several years before the pandemic.
“For several years in a row, there was a surplus, so no macroeconomic imbalances were formed, we achieved the highest credit ratings in Lithuania’s history, inbound tourism, which suffered the most from the pandemic, accounted for a relatively small share in Lithuania.” said the minister.
He expects the Lithuanian economy to start to grow next year, as the main export partners will recover quite quickly and domestic demand will be determined by investments in the DNA of the economy.
By the way, the Finance Ministry assumes that the virus will spread for several more years, because neither an effective vaccine nor drug has yet been developed, but no drastic measures will be taken to control the pandemic in Lithuania or other countries.
We fell less in the second quarter
Swedbank forecasts that Lithuania’s GDP will contract 1.7 percent this year, which will be the smallest economic slowdown in the euro area.
According to Eurostat, the decline of the Lithuanian economy in the second quarter, most of which was in quarantine, compared to the first quarter, amounted to 5.5 percent. and it was one of the smallest in the European Union (EU), with only the Finnish economy contracting.
Evaluating the GDP data for the second quarter, V. Šapoka said that Lithuania weathered the economic shock caused by the coronavirus pandemic well, but emphasized that the economy felt “values optimism” as the deterioration of the pandemic situation it could cause significant damage to the country’s economy.
At the end of June, the Ministry forecast that the Lithuanian economy would contract 7% this year and 7.3% in April. decrease.
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