Entrepreneur working with Sweden sees alarming signs: ‘The whole industry is really on the rise’

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“Order volumes are down significantly at the moment, as are most of them. Especially to Sweden, where the whole industry is actually recruiting. There are definitely challenges recently,” says Audrius Pažūsis, director of the Metmega company.

Due to the lack of orders, the business slows down its turnover and reduces production.

“The trend is that the market will not recover soon. The reasons are both clear and not so clear. Bank interest rates and this situation with wars are the basis”, says A. Pažusis.

The prognosis worsened

The Bank of Lithuania is also talking about the stagnation of the Lithuanian economy, which worsened the macroeconomic forecasts for 2024. It is said that the Gross Domestic Product, which shows how much goods and services were produced in the country, should grow more slowly than thought in December.

Some commercial banks also worsen the forecasts. Luminor economist Žygymantas Maurics explains that GDP growth should not exceed 2 percent this year.

“Economic growth in the euro zone is significantly slower than expected. Germany has once again become the sick man of Europe as it faces major challenges. Had too much energy dependence on Russia. Still living in a huge spike in energy prices, the consequences are dire. The slow recovery of the euro zone automatically slows down our recovery”, says Luminor economist Žygymantas Mauricas.

“SEB” economist Tadas Povilauskas also comments on the situation:

“Things in the industry are not getting any worse, you have to admit that, at least looking at the last few months, but to say that there is also stronger growth is not the case. We understand that the situation in the export markets is sluggish. There is stagnation”, says T. Povilauskas.

Housing interest will not decrease

Economists also have bad news for those waiting for mortgage payments to start falling. It is said that the European Central Bank does not change its opinion: it is in no hurry to reduce interest rates. Residents may even have to wait until late summer or early fall.

“The fall was already expected in April, May of this year. These expectations are receding, now it is even expected that perhaps the first reduction will take place only in August, because they are no longer looking so much at the inflation indicators, which have decreased, but rather at the wage growth, which is still fast, and they say that it is too early,” he assures economist Ž. Maurice.

“We think that it is still realistic to wait for the first reduction in ECB interest rates in June,” says economist T. Povilauskas.

Residents must be prepared that the decrease in interest rates through lower loan payments will be felt very late.

“In any case, even if interest rates are lowered in June, we would feel the effect only after a good six months. At the end of the year, at the beginning of next year. Due to the fact that loans are reviewed twice a year”, says economist Marius Dubnikovas.

Economists have different opinions

Interest is also important for some Lithuanian business sectors.

“What suffers the most and who wants lower interest rates the most is the real estate market and the construction sector. This year is also, it seems, going to be bad enough”, says T. Povilauskas.

Economists also have different assessments of the impact on the country’s economy next year of the planned tax increase in Lithuania due to growing defense costs.

“Our situation will look somewhat similar to this year’s situation in Estonia, when Estonia has significantly higher inflation and lower economic growth. We will have higher inflation next year, which will be caused by tax increases and economic growth that is not as fast as expected”, comments Ž. Maurice.

Žygymantas Mauricas believes that economic growth in 2025 will not reach two percent due to plans to increase taxes, but the Bank of Lithuania presented a much more optimistic GDP growth forecast this week. According to economist Tadas Povilauskas, the new taxes should not significantly disrupt the economic situation in Lithuania.

“Increasing the VAT rate by one percentage point is not something very serious. Should we increase the profit tax by one, two or three percentage points? There is nothing that will destroy very strongly”, assures “SEB” economist T. Povilauskas.

It is true that Lithuania currently looks the best among the Baltic states. According to Luminor’s forecasts, Latvia’s gross domestic product should grow more slowly this year than Lithuania’s, by more than one percent per year, and Estonia’s economy should shrink by another percent.

Learn more in the video at the beginning of the article.