Lithuania – a member country of European Union on the eastern coast of the Baltic Sea. It shares its border lines with Latvia, Poland (both – EU members), Belarus, and Russian exclave of Kaliningrad Oblast.
Since joining the EU and in 2004, Lithuania has been facing a rapid nominal growth of 6.0% annually (including the impact of inflation) or real growth of 2.7% in its economy.
Not only has it been developing rapidly on economic side, but on political and social as well. This rapid development let the country to be where it is now in 2017:
#16/190 in Ease of Doing Business (World bank, 2017),
#16/180 in Index of Economic Freedom (Heritage Foundation, 2017),
#23/180 in Environmental Performance Index (Yale University, 2016), and many more.
According to Statistics Lithuania, Lithuania is on a steady growth of National GDP, reaching 30.9 billion EUR in the first 3 quarters of 2017 (+8.2% vs. 2016 Q1-Q3).
Due to high emigration in the last decade and its continuation now, the annual growth in population up to this date is negative. Therefore, the GDP per capita over these years has risen at even a higher rate than the National GDP, reaching 10,900 EUR in the first 3 quarters of 2017 (+9.6% vs. 2016 Q1-Q3).
As mentioned above, the negative slope of population number in country has concluded in 2.81 million people in country at the end of 3rd quarter in 2017 which is 44,600 people (or -1.6%) less than at the end of the same period in 2016.
On the positive note, it is worth mentioning that Foreign Direct Investments (FDI) are increasing year after year, meaning that foreign investors are more eager to do their business here in Lithuania each year. Per the latest data of 2nd quarter of 2017, 14.3 billion EUR has come to Lithuania as FDI and that was 963 million EUR higher as compared to the corresponding quarter in 2016 (+7.2%).
For more information about Lithuania’s business environment, please check a recent analysis made by Invest Lithuania.
SOME FACTS ABOUT THE ECONOMY
Last year, Lithuania's economy was growing slower than in the past few years. Like throughout the year, in the last quarter of 2015 an unfavourable external environment was the main factor leading to slower economic development. However, this factor has not so far affected households' expectations and consumption which is the main driver for economic growth. The uncertainty in respect of the prospects of the global economic growth remains high, however, a slightly faster economic growth in Lithuania can be predicted in 2016 - it should be up to 2.5 percent - 0.6 percentage point faster than in the previous year.
Although this year's expected 0.7 percentage points slower than forecast last autumn, Lithuanian economic growth, it will continue to be the fastest between the European Union and the euro zone. The Ministry of Finance predicts for this year of 2.5 percent GDP growth, at the same time, the European Commission forecast Lithuania - 2.9 percent.
Designing a lower than expected in 2015 in autumn, 2016 GDP growth had to evaluate changes in the external environment and changes in the construction and agricultural sectors.
Exports to the European Union, the main Lithuanian foreign trade market, are consistently growing. Adaptability in redirecting exports to new markets will have an even greater positive impact on the overall annual economic growth in 2016.
Households' consumption is the brightest light in Lithuanian economy. Consumption is growing quite significantly, regardless of the persisting uncertainty in respect of the country's economic prospects. It is forecasted that the unemployment rate will continue to decline and will reach the natural rate of unemployment. This year, wages are expected to increase approximately by 5 percent, thus, given low inflation, consumer purchasing power will continue to grow.
The average annual inflation rate remains negative hence prices are lower than they were a year ago. A fall in prices was mostly determined by a decline in the prices of energy raw materials, especially oil prices. Annual inflation is likely to become positive this year, however, raw material prices having hit new lows at the beginning of the year, trends in the price fluctuations should continue to be favourable to consumers.
In 2015, retail trade volumes increased by 2.1 percent in comparison with 2014. Positive situation in labour market, i.e. decreasing unemployment and growing wages, allows us assuming that a moderate growth of retail trade should be further observed. As in the past few years, private consumption was driven by the improving labour market environment, increasing employment rates and rising wages. Decreasing unemployment (having reached 9.4 percent in 2015, it is likely to fall to 9 percent in 2016) and new emerging jobs have determined the growth of wages at a similar pace as in 2014. In addition, it was increased by the monthly minimum wage raise. Last year, wages were raised by over 5 percent. The private sector saw the largest increase in fixed wages. It was influenced by a growing demand for labour force and the need to retain qualified professionals. Next year, the macroeconomic environment should have a positive effect on consumption.