2023.05.26. The country is hit by political and bureaucratic chaos, Echo of Lithuania

Vidmantas Janulevičius

President of the Confederation of Industrialists

While the Lithuanian political system is engulfed by an incomprehensible storm, difficult days are approaching for the Lithuanian economy. What are we going to do?

The State Data Agency has published the latest changes in industrial production. And although this m. in April industrial production increased by 2.7 percent, it decreased by more than 10 percent compared to 2022. January – April

Where is the contraction most pronounced? Manufacturing output decreased by 9.2 percent, respectively. Negative sentiment prevails in such sectors as the production of leather and leather goods, the production of basic metals, chemicals and chemical products, the production of wood products, and the production of other non-metallic mineral products.

The furniture production sector, which was widely discussed yesterday, continues to fall, and the production of textile products suffers. Indeed, there are few sectors of the manufacturing industry left where production growth would be recorded – large, large manufacturers are already going through difficult times today.

It is difficult to find positive signs in the world and EU economies today. For now, all attention is focused on the great uncertainty, the still-unending drama of the ECB’s interest rate hike. With such an alarming picture in front of us, a natural question to be asked of those in power is who should take the decisions that are already delayed?

RRF funds, which were supposed to help Lithuania recover from the COVID-19 pandemic, are so far more of a mirage than real financial instruments that could and should have amortized the difficulties experienced by the industry (and not only it).

If the second disbursement of RRF funds is contingent on tax reform being submitted, what are the chances that: a) it will be introduced in session this political season (I would think the chances are already very slim); b) whether it will be presented in the autumn term session (after the chaos of early election deliberations – the probability, I think, is equal to 5%); c) after the resignation of the Government, a new Government is formed, which submits a new tax reform (the probability that it will be prepared and submitted on time is even lower than 5%).

In other words, I don’t see how and in what ways the RRF funds could realistically not get stuck in the political and bureaucratic chaos currently engulfing the country. It is well known to everyone that during periods of political instability and pre-elections, the bureaucracy does not work and does not make decisions. And they are needed now!

Today, every day is worth its weight in gold, every day a late decision means that the RRF funds will reach us later, the economy will have a positive effect later, more workers may have to be laid off.

We talk little about the newly added loan part of RRF support. It has already been mentioned that it will be distributed under market conditions, that is, by applying the currently valid interest rates, which are among the highest in the EU in Lithuania.

I don’t know what crime Lithuanian industry has committed, but when we talk about support, it should at least be similar to support (operating where the market does not work). In other words, if the support is intended to revive the economy after the COVID-19 pandemic, then by the time we get there, we should not have forgotten the pandemic.

It’s hard to understand what’s going on in the state right now, but it doesn’t bode well for ANYONE at a time when a strong shoulder shrug is needed in all areas.

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