Economic development in Lithuania allows a country to remain competitive

Although the latest macroeconomic indicators of Baltic States raise skepticism, the economic analysts feel calm. The latter ones claim that Baltic States have grown disproportionately in a rapid pace for the last three years. Therefore, economic decline is considerably higher. A newly developed economic potential of Baltic States did not disappear. Conversely, after the recovery of world market, economies will definitely reveal their tremendous value.

Even in difficult economic circumstances, the competitiveness of business and industry remains strong. What is more, certain trends develop extra positive impulses. The labor force that is actually becoming dramatically cheap and its extensive expertise, raw materials price drop, favorable conditions for Greenfield investment (industrial parks, free economic zones), stimulation for innovation (high-tech parks, science and business valleys), a well-developed public infrastructure, decreasing bureaucracy and favorable conditions for business is a key for Lithuania’s competitiveness.

Some experts believe that Lithuania, in spite of its relatively small market, is attractive to foreign investors. Additionally, the latter ones are interested not only in Lithuanian and neighboring market but also in Russia and CIS countries. Lithuania is thought to be attractive country not only for its geographic location but also for its higher awareness of cultural aspects as well as close and sustained ties with former Soviet countries.

EU economy below zero

A provisional head of the Department of Statistics Jonas Markelevi?ius explains that due to economic recession gross domestic product (GDP) of almost all European countries declined in the first quarter of this year. The difference between GDP in Western countries and Eastern was slightly noticeable. The decline of GDP was a bit slower in Western countries than in Central and Eastern states.

‘According to the data we have collected, almost all EU economy is below zero, except for Cyprus, where the growth of 1.5 percent was fixed, and Poland, with its 1.9 percent growth. The reason for Cyprus rise is apparently its distinctive economy that largely emerges from service sector. Meanwhile, Poland’s rise is difficult to explain. – J.Markelevi?ius says.

An economist, Violeta Klyvien?, reveals reasons for Poland high competitiviness. According to the economist, Polish economy makes wonders and it is probably the only country that did not suffer from recession or negative growth. „ It can be logically explained on the basis of the Polish economy structure. It was an export-oriented economy, although many export-oriented economy shrinked, Polish economy export structure was more favorable for crisis conditions. Furthermore, Poland managed to remain fairly competitive. Recent devaluation of zloty was also one of the factors that could contribute positively to the development of export and slow down the free fall that was really astonishing not only in Baltic States but also in other countries. On the other hand, during the boom period, Poland has managed to attract impressive amounts of direct foreign investment. It indicates that investment in production and industry can be very effective vaccine against international crises and fluctuations. – V. Klyvien? says.

Improving consumer expectations save economy

According to „Danske“ bank senior analyst V.Klyvien?, the most difficult situation of all Baltic States is in Latvia. Lithuania is safe, partially, thanks to more diversified industrial structure and export.

Euro zone recovery is mainly related to the export market activity. Euro zone export structure is more favorable for EU old members rather than Baltic States. More than one-fifth of export takes export to the Asian region, which starts to recover rapidly, especially in China. It is a crucial factor that makes us believe in a very possible euro zone recovery this year. It would be a great news for Lithuania“,- points out V.Klyvien?.

The interviewee believes in a strategic importance of Baltics States for Russian market, which is related to global oil prices. „ Not many people predict more significant recovery in Russia both this and oncoming year. Presumably, the external environment remains unfavorable for Lithuania and it is one of the major factors, why many analysts‘ forecasts are rather negative ones. However, there are still particular signs of recovery – a consumer confidence index (CCI) seems to move on“-notes economist.