Such predictions anger some
Indrė Genytė Pikčienė, Chief Economist of Šiaulių bankas, says that the inflation that exhausted Lithuanians and affected not only financially but also psychologically has already receded. This is also reflected in the context of the European Union (EU) countries, as Lithuania has the lowest inflation.
“Currently, Lithuania has already recovered the loss of purchasing power that was eaten away by the inflation shock. In terms of real purchasing power, we are back to where we were before the inflation shock. From this moment on, purchasing power will grow and strengthen,” the economist shares her insights.
True, it seems to some residents that such forecasts do not correspond to reality, so they consider them “false”. However, as I. Genytė-Pikčienė notes, in many cases the general trends may not coincide with the assessments of individual persons, because this is a very large-scale aggregate of samples.
“Therefore, it is natural that there is really a lot of indignation, especially in such rapidly changing circumstances. So it’s understandable that general trends sometimes make people angry,” the economist commented on the residents’ reactions.
We were ready for difficulties
It is added that, in general, the Lithuanian economy started the year with one of the fastest growth in the EU. This also adjusts the gross domestic product (GDP) forecast accordingly – this year it is planned to be 2 percent. target growth, and next year – 2.7 percent.
“The Lithuanian economy was well prepared for the period of difficulties. This was due to the low level of population and business indebtedness, the successful years of development after the pandemic, which helped economic participants to accumulate financial reserves, and the more abundant investments of EU structural funds that reached the Lithuanian economy in time.
For these reasons, even in the face of high interest rates and sluggish external demand, companies did not reduce production capacity and did not thin the ranks of employees in order to be ready to respond flexibly and quickly to the recovery of export demand,” says I.Genytė-Pikčienė.
What is happening in the real estate sector?
And looking at the dynamics of individual industries, it can be seen that wood and furniture companies, which are extremely important for the real estate (NT) sector, are recovering. Not only the filling of warehouses with new stocks, but also the correspondingly increased demand for labor is noticeable here.
“Companies responded cyclically sensitively to the contraction of key export markets, real estate market problems, but now stabilization is felt. “Manufacturing companies are starting to accumulate new stocks and in the position of a compressed spring, they are waiting for the first signals of the recovery of the Western export markets, when they can jump on the train of the recovering economy”, says the economist.
It is true that when it comes to the real estate market, it is believed that the healthy financial situation of the population is also shown by the fact that even when the country was going through a shallow recession, they had the opportunity to make purchases with credit.
“The bank’s portfolio of loans granted by residents is growing fast enough. (…) This shows a really good financial situation of the population, resistance to the tests of high interest rates. Even after the huge inflationary shock that we experienced, the deposits in the accounts did not decrease”, observed I.Genytė-Pikčienė.
More and more Lithuanians are returning to the country
The labor market is also surprisingly resilient. This is a very good sign, because, according to the economist, when residents have a job and are not afraid of losing it, their expectations for the future are brighter. And the financial behavior is correspondingly bolder.
It is noticeable that some of the structural problems of the labor market are being solved at the moment. This is due to a change in migration flows, as there are more Lithuanian citizens arriving in the country than leaving. According to I. Genytė-Pikčienė, the COVID-19 pandemic and Brexit can also influence this change.
“For a long time, Lithuanian employers have experienced a shortage of workers and a lack of specialists in certain professions – arriving residents partially solve these issues and the labor market becomes more efficient,” says the economist.
It is estimated that the rapidly growing number of the employed population in the third quarter of last year reached the records we observed before the Great Recession of 2009.
And salaries, which have grown rapidly up to now, as predicted by I. Genytė-Pikčienė, will continue to maintain their momentum – they say the growth will reach 9.5 percent. per year. Such continuity is believed to be influenced by political decisions dictated by the election period.
