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– How do you get a new job and new responsibilities?
– I like. And seriously, challenges don’t wait. The work started from day one.
– How big is your team?
– About 600 people.
– Is big. When a new manager arrives, the question always arises: how did the team accept him?
– I was well received, I received many congratulations from the team and colleagues for being the first example of an internal career. The chairman of the board of the Bank of Lithuania is in charge, but is part of the Bank of Lithuania. The work is being done by the president, but the entire Bank of Lithuania, so I would like us to see the president and the bank as a whole working for Lithuania.
– Let’s talk about economics. Smells like new releases in here. Doctors look at it with anxiety and how do you evaluate it?
– A difficult question because I am not a public health specialist. Last year it seemed very scary, but we had one of the smallest economic recessions. In Europe, GDP fell 6-7% and our decline was less than 1%.
Of course, this has to do with the economic response of the state. The budget deficit has grown fast enough, public debt has never been higher, but I propose to see this problem as an opportunity to transform our economy into a more modern, greener one and emerge stronger from this crisis. We see public debt as an investment: if the funds are not overfished but rather invested, then the money should return through higher added value.
– You say it matters where we pour the money. Debt is not a problem in itself. On the other hand, there is no other way out. If we don’t borrow, the socio-economic problems would worsen. How do you see this? When can this be a problem?
– Last Friday the program of the State Investment Recovery Fund was presented. I am very confident that these funds will be used to strengthen the economy. As for the growth of public debt, I will repeat: it is very important to have a public debt management plan, how it will be reduced in the future.
– When I speak with economists, I do not feel a dramatic change in the economy from what I hear. Yes, some sectors are having a hard time living, but the overall picture is not very bad. What element of the economic situation: unemployment, inflation, etc. are you more concerned?
– You have rightly noticed that this crisis is not stereotyped. On the one hand, we have a crisis, on the other hand, we have great liquidity.
Most businesses are profitable, with salaries exceeding 10 percent. Some may say: what is the crisis here? Here, as in a hospital, the average room temperature may differ slightly from normal, but some have a fever and others have a stable temperature. The situation is the same in the economy.
The restaurant sector, tourism and commercial companies suffered a great impact due to the pandemic, but the income of the information technology sector increased and the business expanded. If I had to choose the most disturbing thing, I would say that it is inequality. The problem is that lower income sectors have also been working in lower income sectors. Inequality has existed in the past, but now it has become very pronounced.
– Inequality hides tensions in society. This is probably the biggest danger here?
– We all want to live well. Yes, inequality is reflected in increased tensions in society.
– How do you see the real estate boom? Is it time to burst this bubble?
– Good question. The topic is increasing enormously in the media. But when we look at the rise in people’s wages, the growing number of young people in Vilnius, we see fundamental explanations for the growing demand for housing.
Let’s not forget that there was a period when it was not possible to buy a house, so when the opportunity arose, there was the effect of a compressed spiral: people began to buy more. There is another side of the coin: the offer. We see signs that supply will decline as the portfolio of new-build homes shrinks and people start buying from drawings. What is happening now must be closely monitored.
We, as the central bank, have the means: in the case of irresponsible borrowing, we can tighten the regulations, but this would mainly affect buyers who buy a house with a loan. First of all, the supply of housing must be guaranteed. On the other hand, if we see that speculative transactions intensify, the resale of undeveloped housing, perhaps such contracts should be compulsorily registered or notarized.
– We see the actions of the state with a shadow. What do you think should be taken?
– Public finances are a fiscal policy. Taxes make up the majority of the state budget. We see that tax redistribution is one of the smallest in Europe. We have a large VAT gap that has widened despite efforts to reduce it.
We support the initiative to review tax incentives, but it is very important to note that a broader review of the tax system is needed. We can better ensure a more uniform taxation of personal income, less for forms of activity, more for income. We should guarantee more equitable social guarantees for the self-employed. There are opportunities to simplify the tax environment and increase transparency. We should focus on a comprehensive reform of the tax system.
– And, of course, it is important to increase people’s confidence in the taxes they pay to see the benefits of the taxes they pay. I would like to ask, what are your priorities in the banking system? What can banks and credit institutions expect from you?
– We have a concentrated banking system, we focus on it, but there are more market participants. We have 17 branches of foreign banks. Ensuring the conditions for its growth is one of the priorities. Competition can be increased by attracting actors from other countries and creating conditions for the growth of established institutions.
– Do you think that the market is competitive enough and that competition should not be artificially strengthened?
– The market is concentrated. We have a constant debate about dissatisfaction with the availability of banking services and rates for financial services. To respond to this satisfaction, you must refine the problem and take concrete steps to address it.
By the way, not all decisions are in the hands of the Bank of Lithuania. Changes in the law, cooperation with other institutions, expert clarification of the problem are needed.
– You’re not a fan of state banks. What do you think about this?
– Let’s agree on what we call a state bank. If we are talking about a national merger of development agencies, I support this direction. If we talk about a commercial bank with state capital as a supervisory authority, we are indifferent in terms of capital. Supervision requirements apply equally to all institutions.
– Are you waiting for the arrival of new banks?
– There are four banks that we talk about the most. There are two central credit unions and 60 of which we talk less. There are currently 17 foreign bank branches in Lithuania, five of which are in process. So yes, there will be new banks. But I would like to emphasize that we do not focus on the numbers. Let’s focus on the services that banks will provide to the public to solve these problems through a greater variety of financial options and knowledge.
