Economy of Lithuania

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Lithuania, the Baltic state that has conducted the most trade with Russia, faced its own economic and financial crisis in 1999 as a result of the government's wrongfooted economic policies and its inadequate response to the August 1998 Russian financial crisis. The policies that Prime Minister Kubilius implemented upon taking the helm in November 1999 underscore a commitment to fiscal restraint, economic stabilization, and accelerated reforms. The austere 2000 budget was based on a 2% GDP growth forecast, 3% inflation, and a 2.8% budget deficit. Lithuania was invited at the Helsinki EU summit^[1] in December 1999 to begin EU accession talks in early 2000. Lithuania began EU membership on May 1, 2004.

In 2005 the GDP grew by 7.5%, and the inflation rate was 3%.

1 In-Depth Analysis
2 Statistics
3 References
4 See also

[edit] In-Depth Analysis

The Soviet era brought Lithuania intensive industrialization and economic integration into the U.S.S.R., although the level of technology and state concern for environmental, health, and labor issues lagged far behind Western standards. Urbanization increased from 39% in 1959 to 68% in 1989. From 1949-1952 the Soviets abolished private ownership in agriculture, establishing collective and state farms. Production declined and did not reach pre-war levels until the early 1960s. The intensification of agricultural production through intense chemical use and mechanization eventually doubled production but created additional ecological problems. This changed after independence, when farm production dropped due to difficulties in restructuring the agricultural sector.

The transport infrastructure inherited from the Soviet period is adequate and has been generally well maintained since independence. Lithuania has one ice-free seaport, Klaipeda, with ferry services to German, Swedish, and Danish ports. There are a few commercial airports; scheduled international services use the facilities at Vilnius, Kaunas, and Klaipeda. The road system is well developed, including the Via Baltica highway passing through Kaunas. Border facilities at checkpoints with Poland were significantly improved with the help of EU funds, but long waits are still a frequent phenomenon. Telecommunications have improved greatly since independence as a result of heavy investment. There are currently three large companies providing mobile phone services. [1], [2], [3].

The economy of independent Lithuania had a slow start, as the process of privatization and the development of new companies slowly moved the country from a command economy toward the free market. By 1998, the economy had survived the early years of uncertainty and several setbacks, including a banking crisis, and seemed poised for solid growth. However, the collapse of the Russian ruble in August 1998 shocked the economy into negative growth and forced the reorientation of trade from Russia toward the West. Since the Russian monetary crisis, the focus of Lithuania's export markets has shifted from East to West. In 1997, exports to former Soviet states made up 45% of total Lithuanian exports. In 2005, exports to the East were only 18% of the total, while exports to EU members amounted to 65%.

The only operating Vilnius stock exchange ([4]) is still a bit shaky - it suffered from the recent bankruptcy of a company enrolled in the "Official list".

The minimum wage currently stands at 600 litas (€174). The average wage in 2005 was 1453LTL (€420).

Exports to the United States make up 4.7% of all Lithuania's exports, and imports from the United States comprise 2% of total imports. Foreign direct investment (FDI) in 2005 was 2.6 billion litas, which represented an increase of only 4.6% compared to the same period in the previous year.

On February 2, 2002, the government re-pegged the Litas from the U.S. dollar to the Euro at the rate of 3.4528 Litas for 1 Euro. The re-peg, which went smoothly, reflects a change in trade orientation and was meant to help Lithuania prepare for membership in the EU Economic and Monetary Union. However, with the appreciation of local currency against the U.S. dollar, the production costs of enterprises have been decreasing, and competitiveness increasing.

[edit] Statistics

GDP: purchasing power parity - $48.49 billion (2005, IMF)

GDP - real growth rate: 7.5% (2005 est.)

GDP - per capita: purchasing power parity - $14.158 (2005, IMF)

GDP - composition by sector:

agriculture: 6.1%
industry: 33.4%
services: 60.5% (2004 est.)

Investment (gross fixed): 21.9% of GDP (2004 est.)

Population below poverty line: NA

Average net earnings of employees in the whole economy €268 (2005 est.)

Household income or consumption by percentage share:

lowest 10%: 3.1%
highest 10%: 25.6% (1996)

Distribution of family income - Gini index: 31.9 (2000)

Inflation rate (consumer prices): 3.0% (2005 est.)

Labor force: 1.607 million (2005 est.)

Labor force - by occupation:

agriculture: 14%
industry: 29%
services: 57% (2005 est.)

Unemployment rate: 6.1% (September 2006, Eurostat)

Budget:

revenues: $6.542 billion
expenditures: $7.121 billion, including capital expenditures of NA (2004 est.)

Public debt: 25.2% of GDP (2004 est.)

Agriculture - products: grain, potatoes, sugar beets, flax, vegetables, beef, milk, eggs, fish

Industries: metal-cutting machine tools, electric motors, television sets, refrigerators and freezers, petroleum refining, shipbuilding (small ships), furniture making, textiles, food processing, fertilizers, agricultural machinery, optical equipment, electronic components, computers, amber

Industrial production growth rate: 7.3% (2005 est.)

Electricity:

production: 19.27 TWh (2004)
consumption: 10.51 TWh (2004)
exports: 7.20 TWh (2004)

Electricity - production by source:

fossil fuel: 16.75%
hydro: 4.85%
other: 0%
nuclear: 78.4% (2004)

Oil:

production: 4,594 barrel/day (2001 est.)
consumption: 72,000 barrel/day (2001 est.)
exports: NA
imports: NA

Natural gas:

production: 0 m³ (2001 est.)
consumption: 2.76 billion m³ (2001 est.)
exports: 0 m³ (2001 est.)
imports: 2.76 billion m³ (2001 est.)

Current account balance: $-1.6 billion (2004 est.)

Exports: €9.5 billion (2005 est.)

Exports - commodities: mineral products 23%, textiles and clothing 16%, machinery and equipment 11%, chemicals 6%, wood and wood products 5%, foodstuffs 5% (2001)

Exports - partners: EU 65.4%, Russia 10.4%, Latvia 10.3%, Germany 9.4%, France 7.0%, Estonia 5.9%, Poland 5.5%, Sweden 5%. (2005 est.)

Imports: €12.45 billion (2005 est.)

Imports - commodities: mineral products 21%, machinery and equipment 17%, transport equipment 11%, chemicals 9%, textiles and clothing 9%, metals 5% (2001)

Imports - partners: EU 59.1%, Russia 27.8%, Germany 15.2%, Poland 8.3%, Latvia 3.9%, Netherlands 3.7% (2005 est.)

Reserves of foreign exchange & gold: €3.3 billion (2006 est.)

Debt - external: €10.463 billion (2005 end est.)

Currency: litas (LTL)

Exchange rates: litai per US dollar - 2.8157 (2004), 3.0609 (2003), 3.677 (2002), 4 (2001), 4 (2000)

Fiscal year: calendar year

[edit] References

^ http://europa.eu/generalreport/en/1999/pt0595.htm

GDP: purchasing power parity - $48.49 billion (2005, IMF)

GDP - real growth rate: 7.5% (2005 est.)

GDP - per capita: purchasing power parity - $14,158 (2005, IMF)

GDP - composition by sector:

agriculture: 6.1% industry: 33.4% services: 60.5% (2004 est.) Investment (gross fixed): 21.9% of GDP (2004 est.)

Population below poverty line: NA

Average net earnings of employees in the whole economy €268 (2005 est.)

Household income or consumption by percentage share:

lowest 10%: 3.1% highest 10%: 25.6% (1996) Distribution of family income - Gini index: 31.9 (2000)

Inflation rate (consumer prices): 3.0% (2005 est.)

Labor force: 1.607 million (2005 est.)

Labor force - by occupation:

agriculture: 14% industry: 29% services: 57% (2005 est.) Unemployment rate: 6.1% (September 2006, Eurostat)

Budget:

revenues: $6.542 billion expenditures: $7.121 billion, including capital expenditures of NA (2004 est.) Public debt: 25.2% of GDP (2004 est.)

Agriculture - products: grain, potatoes, sugar beets, flax, vegetables, beef, milk, eggs, fish

Industries: metal-cutting machine tools, electric motors, television sets, refrigerators and freezers, petroleum refining, shipbuilding (small ships), furniture making, textiles, food processing, fertilizers, agricultural machinery, optical equipment, electronic components, computers, amber

Industrial production growth rate: 7.3% (2005 est.)

Electricity:

production: 19.27 TWh (2004) consumption: 10.51 TWh (2004) exports: 7.20 TWh (2004) Electricity - production by source:

fossil fuel: 16.75% hydro: 4.85% other: 0% nuclear: 78.4% (2004) Oil:

production: 4,594 barrel/day (2001 est.) consumption: 72,000 barrel/day (2001 est.) exports: NA imports: NA Natural gas:

production: 0 m³ (2001 est.) consumption: 2.76 billion m³ (2001 est.) exports: 0 m³ (2001 est.) imports: 2.76 billion m³ (2001 est.) Current account balance: $-1.6 billion (2004 est.)

Exports: €9.5 billion (2005 est.)

Exports - commodities: mineral products 23%, textiles and clothing 16%, machinery and equipment 11%, chemicals 6%, wood and wood products 5%, foodstuffs 5% (2001)

Exports - partners: EU 65.4%, Russia 10.4%, Latvia 10.3%, Germany 9.4%, France 7.0%, Estonia 5.9%, Poland 5.5%, Sweden 5%. (2005 est.)

Imports: €12.45 billion (2005 est.)

Imports - commodities: mineral products 21%, machinery and equipment 17%, transport equipment 11%, chemicals 9%, textiles and clothing 9%, metals 5% (2001)

Imports - partners: EU 59.1%, Russia 27.8%, Germany 15.2%, Poland 8.3%, Latvia 3.9%, Netherlands 3.7% (2005 est.)

Reserves of foreign exchange & gold: €3.3 billion (2006 est.)

Debt - external: €10.463 billion (2005 end est.)

Currency: litas (LTL)

Exchange rates: litai per US dollar - 2.8157 (2004), 3.0609 (2003), 3.677 (2002), 4 (2001), 4 (2000)

Fiscal year: calendar year