Litva
The largest of the three Baltic republics of the former Soviet Union
The biggest economy among the Baltic states, generating roughly half of this region’s GDP
Most diversified industry in the Baltics
Total area: 65,300 sq km (slightly larger than Belgium, Denmark, the Netherlands, Switzerland or West Virginia)
Population: 2.7 million
Government type: Parliamentary democracy
Administrative division: 10 counties (called „apskritys“) further subdivided into 60 municipalities (called “savivaldybe”)
Capital + other major cities: Vilnius (580,000) + Kaunas (289,000), Klaipeda (149,000), Šiaulilai (101,000)
Currency: Euro (since January 2015)
Languages: Lithuanian (official) 85.3%, Russian 6.8%, Polish 5.1%, other 0.9%, unspecified 3.5%
Ethnicity: Lithuanian 84.6%, Polish 6.5%, Russian 5.0%, Belarusian 1.0%, other 1.1%, unspecified 1.2%
Religion: Roman Catholic 77.2%, Russian Orthodox 4.1%, Old Believer 0.8%, Evangelical Lutheran 0.6%, Evangelical Reformist 0.2%, other 0.8%, none 6.1%, unspecified 10.1%
President: (Mr.) Gitanas NAUSEDA (since 12 July 2019)
Prime Minister: (Ms.) Ingrida ŠIMONYTE (since 11 December 2020)
Date of EU accession: 1 May 2004
KEY FEATURES
- Personal income tax (15%) and corporate tax (15%) rates in Lithuania are among the lowest in the EU
- Lasers and biotechnology are flagship fields of the Lithuanian science and high tech industry
- 90% of Lithuanians speak a second language and 30% of population are university-educated
- Last Baltic country to adopt the euro (January 2015)
MACROECONOMIC OVERVIEW
Lithuania is an open, dynamic and fast-developing country, in the geographical centre of Europe. It is an ideal location for logistics, given its position at the crossroads of Western and Central Europe, Nordic & Baltic region, and Russia and the CIS.
As a member of the EU since 2004, the country has experienced significant growth coupled with the rapid modernisation of its economy. Lithuania was deeply affected by the financial crisis in 2008 yet it has since experienced the fastest recovery in Europe, partly fuelled by a well-performing banking system and a diversified industrial sector. The GDP growth has been relatively strong over the past several years, mainly thanks to strong industrial production, construction, wholesale and retail trade.
The Covid pandemic had only a mild negative impact on the economy and a strong growth of 6% was resumed in 2021. However, the economy has been negatively affected by the war in Ukraine. Lithuania cut energy and trade ties with Russia, and as both countries had historically strong trade relations, this led to a heavy drop in exports and a sharp rise in inflation. The country is also facing an unprecedented economic and political boycott from China after it allowed Taiwan to open an official office in the country
The country is struggling with a steady outflow of young and highly educated people, which combined with a rapidly aging population, could stress public finance and constrain long-term growth.
Selected economic indicators, Lithuania, 2016 - 2022
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||
| GDP |
|
|
|
|
|
|
|
|
| Real GDP growth |
%
|
2.5 | 4.3 | 4.0 | 4.6 | 0.0 | 6.0 | 1.9 |
| GDP at current prices |
€ bn
|
38.89 | 42.27 | 45.26 | 48.86 | 49.5 | 56.15 | 66.8 |
| Foreign trade |
|
|
|
|
|
|
|
|
| Exports |
€ bn
|
26.28 | 31.11 | 34.23 | 37.74 | 36.39 | 44.52 | 58.48 |
| Imports |
€ bn
|
25.98 | 30.11 | 33.35 | 35.43 | 31.79 | 42.19 | 59.8 |
| Balance |
€ bn
|
0.3 | 1 | 0.88 | 2.4 | 4.59 | 2.32 | -1.32 |
| Prices |
|
|
|
|
|
|
|
|
| CPI – average inflation rate |
%
|
0.7 | 3.7 | 2.5 | 2.2 | 1.1 | 4.6 | 18.9 |
| PPI – industry – average |
%
|
-4.4 | 5.1 | 5.6 | -0.1 | -8.9 | 9.6 | 42.0 |
| Employment |
|
|
|
|
|
|
|
|
| Registered unemployment |
%
|
7.9 | 7.1 | 6.2 | 6.3 | 8.5 | 7.1 | 6.0 |
| Average monthly gross wage |
€
|
784 | 847 | 932 | 1,359 | 1,428 | 1,578 | 1,790 |
Source: Department of Statistics to the Government of the Republic of Lithuania, IMF, Eurostat, World Bank 2016-2022
STRUCTURE OF ECONOMY - KEY SECTORS
The agricultural sector contributes 3.2% of the country’s GDP and employs 6.4% of the workforce. More than half of the country’s area is defined as agricultural land.
The industrial sector accounts for 24.9% of GDP and employs approximately 25.7% of the active population. Lithuania’s well-developed industrial base includes the wood processing, chemicals, machine tools, metal processing, construction materials, biotechnology, food processing as well as light industries, including the manufacture of textiles, clothing, furniture and household appliances. Lithuania’s industry is well complemented by strong transportation and service sectors.
Manufacturing, construction, transportation, financial intermediation, and real estate ranked among the fastest growing sectors in the economy of Lithuania. Structurally, there is a gradual but consistent shift towards a knowledge-based economy with special emphasis on biotechnology (industrial and diagnostic). The major biotechnology companies and laser manufacturers (Ekspla, Šviesos Konversija) of the Baltics are concentrated in Lithuania. Also, mechatronics and information technology (IT) are seen as prospective knowledge-based economy directions.
Energy Industry
As Lithuania is the only Baltic state with a nuclear power plant, the country has developed an important energy industry. It has also become an important hub for the transport of oil from the east to Western Europe due to its strategic location on the Baltic coast. Furthermore, the country has become a transit route for natural gas and the country’s energy infrastructure is currently being linked up with the other countries of Central and Eastern Europe.
Food and beverage industry
Main export products include dairy products, fish, meat and preparations made of cereals, flour, starch or milk. Half of the dairy products are sold abroad and exported to Germany, Poland, Latvia, Italy, or the UK. Agricultural and food products account for 18.4% of total exports. The sector benefits from an attractive quality/price ratio, the ability to produce in small batches, or its strategic location.
Laser Technology Industry
Lithuania has established itself as a global leader in the laser technology industry with 80% of the world’s market share for high-energy pico-second lasers, and it is also the world leader in terms of ultra-fast parametric light generator production. The laser technology industry has been helped by investment in research and development and there are currently 11 science, research and development centres dedicated to research in this specific industry.
Services and ICT Industry
The service industry as a whole accounts for 61% of Lithuania’s GDP. Major companies have relocated many of their services operations to Lithuania including Barclays, CSC, SEB, Transcom, Unicall and Storebrand. In recent years Lithuania’s economy has undergone transition to become a knowledge-based and multilingual labour force. According to government statistics, 90% of Lithuanians speak a second language and 30% of the population are university-educated.
EXPORTS & IMPORTS
With its small-scale economy, Lithuania is heavily involved in international trade which makes it sensitive to external factors. Its GDP/export ratio amounts to 87.6%. The country exports to the EU countries only 57.7% of goods and services.
2022 export and import data:
Main import partners:
Poland – 11.7%
Germany – 11.6%
Latvia – 7.9%
USA – 7.5%
Sweden – 5.2%
Main export partners:
Latvia – 12.8%
Poland – 9.1%
Germany – 7.9%
Russian Federation – 6.2%
Estonia – 5.7%
Netherlands – 5.4%
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