Global crisis has wrenched off about 5-6 years from Lithuania’s economy, SEB Bank analysts maintain
‘In Lithuania, convergence with the European Union took place only at the level of businesses, whereas in other areas the country was thrust backwards for 5-6 years on average, i.e. where it was in 2005–2008,’ analysts of SEB Bank maintain.
When presenting the latest Lithuanian Macroeconomic Review produced by SEB Bank analysts, Adviser to the President of SEB Bank Gitanas Nausėda stressed that in 2008–2009 the global financial crisis mercilessly upset the EU convergence process that until that time had been developing consistently. ‘There are only a few countries that survived the global economic crisis with only minor skirmishes – other countries differed only in the depth of the crises that they went through. Together with its other Baltic sister countries Lithuania, unfortunately, was within the group of countries whose economy in 2009 was particularly severely hit: over just a year it lost about 15 per cent of its gross domestic product,’ G. Nausėda said.
The analyst went on to say that according to key macroeconomic indicators Lithuania is now lagging behind the European Union average, and it was only in 2010-2011 that it was able to somewhat improve the situation. According to the data of Eurostat, the European Union bureau of statistics, based on the purchasing power standard in 2005 in Lithuania the GDP per capita accounted for 53 per cent of the EU 27 states’ average, in 2008 it was 61 per cent, whereas in 2009 and 2010 it was 55 per cent and 57 per cent, respectively. (The year 2011 data have not yet been officially announced).
‘Macroeconomic indicators show that economy has been thrust backwards, however, one should not depict the economic situation in Lithuania only in gloomy colours. At company level we, on the contrary, are even more geared up and today in many areas we are little behind our competitors in Western Europe,‘ G. Nausėda stressed. He maintained that under economic downturn conditions micro and macro trends have quite often been in conflict, for instance, with the aim to improve cost efficiency, companies dismissed a lot of work force only to increase the ranks of the unemployed worsening the level of unemployment. The same holds true of salary cuts resulting in a prominent drop in average wages in 2009.
G. Nausėda maintained that currently according to the GDP per capita our country is at its level of 2007–2008, in terms of private consumption per capita it is also back to 2007–2008, in terms of the share of food products within the consumption basket – back to 2006–2007, in terms of real wages – back to 2006 (in this particular area the situation was deteriorating further), in terms of the level of unemployment – back to 2001–2002, in terms of stock index in the local market – back to 2008, in terms of residential property prices – back to 2005. ‘Thus the infection caused by Lehman Brothers and the current on-going Euro zone debt crisis w have lost, on average, 5 to 6 years,’ G. Nausėda said.
True, other EU Member States also turned their clocks backwards: Greece as many as 12 years, Latvia – 9 years, Ireland, Italy, Portugal and Spain – 7 years. Even Germany and France could not avoid a return to the past by 2 and 4 years, respectively. ‘Such a race among some of the countries in backward direction means disintegration rather than convergence. AS can be seen from the data provided, the economic and financial crisis has comparatively more severely hit the countries that are not the EU leaders in terms of the GDP per capita and other numbers indicating the living standard,’ G. Nausėda said. According to the analyst, all this indicates that since 2009 the process of Lithuania’s convergence with the European Union has stopped and at present it would be too daring to maintain that this country has been able to get back on the track of consistent and long-term development.
In the opinion of G. Nausėda, the country’s business problem number one is not operational efficiency or cost level, but a lack of awareness about it and absence of a strong brand – this is the reason why a significant part of the value added produced goes to foreign partners.