Economy review
Lithuania is still one of the fastest growing economies in Europe. In the last quarter of 2012 as compared to the previous quarter, annual growth of GDP decelerated a bit to 4.1% as the effects of unusually good season for agriculture output wore off. The pace was still better than expected and helped to reach the GDP growth of 3.6% for 2012. The growth was driven by soaring added value in all economic activities except the construction sector. Lithuanian exports grew by 14.5% in 2012 and remained an important component in country’s economy. It is now clear that they were not affected by the euro zone crisis to any greater extent. In addition, household consumption contributed to the growth significantly by increasing by 4,7 % in real terms in the 2012. Consumer confidence has followed this pattern throughout the period under review as witnessed by Consumer Confidence Indicator which increased by 4 percentage points throughout the quarter and at the end of period was 14 percentage points higher than a year before. Economic Sentiment Indicator (which in December increased by 4 percentage points on annual basis) suggests that positive trends in the economy are likely to continue.
After stalling for a couple of months the fall of unemployment continued. Although the economy is growing below potential businesses continue to hire. Estimates of Labour Force Survey conducted by Statistics Lithuania show that the seasonally adjusted rate of unemployment stood at 12.3 % in December of 2012. The figure is 1.4 percentage point lower than in the same month of 2011.
2012 was yet another remarkably good year for Lithuanian exporters. Total exports amounted to €23 069.8 which is an increase of 14.5% as compared to 2011. Such growth was achieved under unusually bad external economic environment and gives reasons to believe it will continue. However, high levels achieved will technically make the growth numbers seem smaller. As the matter of fact, the level of exports would have been even larger in the period under review; however, one major oil refinery was down for maintenance for 5 weeks and had a negative impact on the figures.
Industrial production output beat the record set in 2008. The performance of Lithuanian industry could have been even better if not the maintenance of one large oil refinery that had an impact on the aggregate result. However, in 2012 industrial production output managed to be 3.7% larger than in 2011 and 1,1% larger than in 2008. Without refined oil products it increased by 6.7% and 4.0% respectively. Since the euro zone is expected to recover in 2013, the downside risks for Lithuanian industry are less severe than a year before. This leads to modest optimism that the growth will continue at a similar to the recently observed pace.
Economic sentiment indicator (ESI) and Consumer confidence indicator (CCI) have been picking up since the beginning of the year. CCI has reached ‑15 level in January of 2013 and ESI stood at ‑5 level. The former was above its long-term average by 2 points meaning that the consumers were more optimistic about the economy than it is usual for them on average. On the other hand, ESI stood 3.9 points below its long-term average (still 4 percentage points higher than a year before).
All but construction and transportation sectors were soaring in 2012. The main obstacle for expansion in the former sector is the supply overhang coming from the pre-recession years. The transportation sector experienced reduced cargo traffic because of the economic troubles in foreign markets and the maintenance of the oil refinery in Mažeikiai. However, the amount of passengers arriving and leaving in Lithuanian airports grew by 17.6% in 2012. Retail trade soared along the domestic consumption and achieved a 3.9% bigger turnover than in 2011.
Economy review of Lithuania, March, 2013
Last date edited: 2013-04-15