How Lithuania’s economy survived the pandemic
Last year’s pandemic will affect the global market for a long time, and its effects are felt in different segments. At the same time, some countries were affected more and others less. If we analyze the EU countries, Lithuania’s economy coped with the crisis the best. In 2020, its GDP declined by only 2.2%. Experts explain this situation by a number of factors.
Lithuania is in an advantageous position among many EU countries, because its economy does not depend on tourism, which suffered significantly. Farming is well-developed in the country, and last year there was a good harvest, which provided people with a supply of products. Logistics companies have significantly increased the amount of freight turnover due to an increase in online purchases.
Quarantine restrictions and the shift to remote working contributed to a dramatic increase in demand for products from technology companies in the information and communications segments. Their sales increased by 50%.
The reasonable approach of the Lithuanian government should also be noted. The authorities introduced quarantine restrictions as soon as the first seven cases appeared. Thanks to this it was possible to significantly reduce the risk of coronavirus spread and minimize the burden on the healthcare system.
As for business, it was able to survive thanks to financial reserves accumulated during previous years. Thanks to the good performance in previous years, companies were able to optimize costs and survive in difficult times.
The Lithuanian government assured its citizens that the country would have no problems financially – the state reserves have enough money to survive the pandemic. And since the third quarter of last year, the economy began to recover quite actively. The general mood in the country was also optimistic; already in May retail sales reached the pre-crisis level. People were not afraid to spend, realizing that the local economy was able to emerge from the pandemic with dignity.
For several years, Lithuania has had a budget surplus, which contributed to an increase in the credit rating of the state. Its level equaled that of Japan, In order to reduce the unemployment rate, the Lithuanian authorities introduced a special program of tax deferral, credit vacations. There were special subsidies for entrepreneurs, which allowed them to survive the lockdown.
Such Lithuanian results are even more surprising against the background of the situation in major powers with developed economies, such as the U.S. in the second quarter of GDP drop was more than 32%. Many EU countries also suffered huge losses, especially Spain, Italy, and a difficult situation in France and Greece.