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Ceturtdiena 19.07.2018 | Name days: Jautrīte, Kamila, Digna
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Trump presidency and EU ballots among exterior factors to shape Lithuania’s life in 2017

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Linas Jegelevičius for the BNN

Four economy luminaries have opined this week on looming threats to Lithuania and its national economy in the months to come. Despite disagreements on the tack a new «peasants»-orchestrated government is about to take, leading economists have firmly concurred on a couple of developments.

Current events were commented on by Žygimantas Mauricas, chief economist of Nordea Bank Lietuva, Jekaterina Rojaka, chief economist and of Economic Research Department at DNB Bank, Rokas Grajauskas, chief economist for the Baltic region and Danske Bank, and Gitanas Nausėda, chief economist at SEB Lietuva Bank and a sought-after guest at many premier TV forums.

Donald Tump presidency a major factor

First, the prospects of Lithuania, as well as the world, are very much hinged on the course to be taken by Donald Trump, the U.S. president-elect, and, domestically, a slew of economic developments are to be watched out.

For Rojaka, the nervous geopolitical situation creates imminent menace that might spiral out of control.

«As it (situation) is hardly predictable and manageable, it entails exterior shock. Today, a big risk also arises from China, I mean in terms of money politics changes and also because of the geopolitical influence,» the pundit prognosticated.

Some of the aftermaths of a rapidly changing political landscape, she believes, Lithuania will start feeling already next year.

«We are awaiting in early December Italy’s referendum on constitutional reform, then, next year, we have the development-determining votes in France, Germany and elsewhere,» she said.

Crucial ballots for Europe

Italy’s referendum for constitutional reform is due to take place on December 4 and proposes streamlining the legislative process by decreasing the power of the country’s second chamber, its senate. Italian Prime Minister Matteo Renzi has threatened to resign if the amendment proponents prevail.

It is feared that with Italy voting «yes» the pressure to pursue similar reforms will likely roll on the other European countries, which also may seek to put many until now unquestionable things on ballot.

The baton of change, almost surely, will be passed onto France, with its presidential election due to take place in April next year.

Although Lithuania has not sensed any tangible fallout from Brexit, it, however, can come in 2017, believes Rojaka.

«In European and international waters, we (Lithuania) are like a tiny boat in a tempestuous sea, where our success depends on several things – right balancing, flexibility and a smart shipmaster,» Rojaka drew a comparison.

She is convinced Lithuania will likely deal with a significant political risk next year.

«It is urgent that business and authority retain the ties (amid a possible political risk). Having a right investment environment is as much important…If something does not work there, the business expectations will worsen,» Rojaka cautioned.

Many issues await incoming PM

Echoing the incoming Lithuanian government’s education concerns, the economist also singled them out, as well as necessity to invest into workforce skills improvement and bolstering immigration politics.

Lithuania’s President Dalia Grybauskaitė has appointed Saulius Skvernelis past Tuesday as the country’s new prime minister.

The head-of-state authorized Skvernelis to form a new government within 15 days and submit its line-up for approval.

During the voting on the parliamentary floor, the candidature of the 46-year-old former police chief and interior minister was endorsed with 90 MPs voting for him, four against and with 33 abstentions.

Little work efficiency

Meanwhile, Grajauskas, of Danske Bank, accentuated issues stemming from little work efficiency.

«Alas, our productivity growth falls behind the wage growth more and more. When it happens, then the export starts skidding because companies are forced to increase their commodity prices, which backfires in the consumers’ declining ability to buy the goods. This is a big issue for Lithuania since export has been the engine of our economy and we are still much reliable on it,» the economist emphasised.

In his words, work efficiency in Lithuania grows only 1-2 per cent yearly, which is just too little compared to the upping wages.

«The wages are growing very rapidly and there are not any reasons why they should slow down. However, there’s shortage of workforce – demand for it is rising but there is no supply,» Grajauskas noted.

As Rojaka, he suggests the new government to invest into education.

«We ought to focus on education quality, not quantity. Lithuania fails to attract talents. We ought to attract young people from abroad, specifically from Ukraine, Belarus and Georgia, so they could start their business here,» the economist reasoned.

Invest in people, not only in manufacturing

Addressing to Lithuanian businessmen, he called on them to invest more in people, not only in their manufacturing facilities and equipment.

«We should exert our efforts in expanding the chain of value creation, I mean in terms of marketing and solidifying the brand. As a nation, we are lagging too much (in that regard), as we are focused too much on the product creation. If we were working in that direction along with universities, we could see a breakthrough in the field,» Grajauskas predicted.

Meanwhile, Gitanas Nausėda, the chief economist of SEB Lietuva Bank, believes that the Donald Trump presidency bodes a lot of indefiniteness.

«It constitutes the largest risk both to the world and Lithuania, too. The presidency-related anxiety can lead to a big investment drought, a result of the unpredictability as to what to expect from the new US authority,» Nausėda underscored.

He predicts that Lithuanian market, in 2017, will be competitive as never before.

«It will be marked with workforce shortage, which will lead to an abrupt hike in its costs,» the SEB Lietuva banker concluded.

Emphasising that traditional markets will not bring «much joy» to Lithuania in 2017, he called on Lithuanian businessmen to look for new ones.

Redundant state workers have to go

Nausėda also believes that Lithuania should downsize the apparatus of local municipalities and government.

«The reduction should be in the range of 30 per cent. As people continue leaving the country, the number of municipal employees goes up,» he noted.

Meanwhile, Žygimantas Mauricas, of Nordea Bank Lietuva, believes that the biggest challenge is within…Lithuanians themselves.

«We are just a mere reflection of the state…We need to think of what kind of a state we are creating and what kind of a state we would like to see,» the economy pundit said.

Another major challenge Lithuania faces is tax evasion and, therefore, the state’s inability to collect taxes.

«In the light of our determination to keep free education and other free services, the situation is really bad…The employers do not want to pay higher wages to people toiling in public sector because they do not believe that the quality of public services can improve,» Mauricas emphasised.

He says it is worth to give a thought on handing over part of public services to private business and alleviate thus the state’s tax burden.

Emigration tops all issues

On top of the hot-button problems is emigration, all the economists agreed.

«Lithuania can still offer a very low pay. I suggest decreasing the taxable level of income, so that the workers can pocket at least a thousand euros by 2020. If the wages do not go up, then we will see even larger emigration,» Mauricas predicted. He added: «Lithuania is in race with the time, and reforms have to be done now. Otherwise we risk to get stuck in the vicious circle of emigration and poverty.»

Ref: 020/111.111.103.4445


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