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The Lithuanian Economy - No 7, October 4,  2011
The Lithuanian Economy - No 7, October 4,  2011
The Lithuanian Economy - No 7, October 4,  2011
The Lithuanian Economy - No 7, October 4,  2011
The Lithuanian Economy - No 7, October 4,  2011
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The Lithuanian Economy - No 7, October 4, 2011

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The Lithuanian Economy - No 7, October 4, 2011; As exports decelerate, consumption increases

The Lithuanian Economy - No 7, October 4, 2011; As exports decelerate, consumption increases

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  • 1. The Lithuanian EconomyMonthly newsletter from Swedbank’s Economic Research Departmentby Nerijus Mačiulis, Vaiva Šečkutė No. 7 • 4 October 2011 As exports decelerate, consumption increases  The growth of exports in goods reached 38.3% during the first seven months of 2011 compared with the same period in 2010. Food, agricultural products, and mineral products have remained the major contributors to export growth during the past two years. However, the importance of machinery, transport, chemicals, and plastics has increased.  Exports to the EU countries still amount to 60% of all exports in goods; and these countries by far remain the main destination for Lithuanian goods. During the last few years, the export share to the CIS region has expanded while the export share to the EU has decreased. As growth in the euro area ebbs, it is likely that this trend will continue. Overall, a rapid slowdown in growth of exports is likely.  As exports growth decelerates, the economy is becoming more dependent on domestic consumption. Fortunately, global uncertainly had little impact on household confidence and consumption – in August, retail trade, except of motor vehicles, increased at the fastest pace in more than three years. quarter of 2006. The share of transports in totalRecord breaking export growth starts to exports in services increased from 51.1% in 2005decelerate (55.3% in 2004) to 58.6% in 2010, while the shareThe strong growth in exports has continued this of tourism services decreased from 31.8% in 2004year – the nominal growth of exports in goods to 25% in 2010. The transport sector, however,reached 38.3% in the first seven months of this was among the hardest hit in 2009, when exports ofyear, compared with the same period in 2010. its services declined by 23.4%.However, the increase in exports of goods isdecelerating rapidly – growth reached 49.7% in the Exports, million LTLfirst quarter, and declined to 33.5% in the second. 7000The export growth in goods produced in Lithuania 6000decreased from 41.4% in the first quarter to 22.3%in the second one. Exports of services increased by 500010.9% during the first seven months of this year, 4000but their growth decelerated even more rapidly – 3000from 24.0% in the first quarter to 4.7% in thesecond. 2000Exports of goods exceeded 2007 levels at the 1000beginning of 2010. Export growth rates have 0remained above 2010 this year, except for services. 2004 2005 2006 2007 2008 2009 2010 2011Exports of services expanded at a much slower Exports of goodspace and, due to declining or even negative annual Exports of serv ices Exports of goods produced in Lithuaniagrowth rates, exports of services dropped below the2007 level in July. Source: Statistics Lithuania, Bank of Lithuania, SwedbankThe transport sector has been the main contributor Exports in tourism services had been decreasing forto the growth of services exports, from the second the seven quarters from the second half of 2008 to Economic Research Department. Swedbank AB. SE-105 34 Stockholm. Phone +46-8-5859 1000 E-mail: ek.sekr@swedbank.com www.swedbank.com Legally responsible publisher: Cecilia Hermansson, +46-8-5859 7720. Nerijus Mačiulis +370 5 2582237 Lina Vrubliauskienė +370 5 258 2275. Vaiva Šečkutė +370 5 258 2156.
  • 2. The Lithuanian Economy Economic Research Department, Swedbank No. 7 • 2011 10 04the second quarter of 2010. However, these exports machinery and transport became smaller beginninghave since been rebounding at an accelerating in 2008; however, the majority of these goods arepace, and their growth exceeded the growth of re-exported and therefore are not as related to theexports of transport services during the first three real Lithuanian economy.months of this year. Export structure, %; 2004-2011(January-July)During 2011 or 2010, some groups of products 100%demonstrated growth rates higher than those 90%recorded for at least the past five years. The 11.9% 9% 8% 8% 6% 6.7% 6% 5.5% 80%exports of chemical products increased by 59.5% 10.0% 11% 12% 16.0% 15.6% 15.8% 14.9% 15.9% 70%this year – 5.5 percentage points more than in the 60% 21.8% 21% 23% 17.3% 18%boom year of 2008. Export growth rates of transport 23% 19% 18.9% 50%(56.7%), metal (43.7%), machines and equipment 40% 21.5% 24%(35.3%), wood (34.2%), and textiles, wearing 25.2% 27% 24% 14% 25% 25.0% 30%apparel, and leather (20.8%) hit record levels as 11% 9.7% 9% 20% 10% 8% 7.6%well. 11.4% 11% 10% 14% 17% 16% 19.6% 18% 15.8% 11.5% 13%Growth was also significant in the higher-value- 0%added product groups. The exports of optical 2004 2005 2006 2007 2008 2009 2010 2011 Food Wood, f urnitureinstruments have increased by 40.0% this year. Mineral products Machinery , transportEven though these exports were growing faster Chemicals, plastics Textiles. wearing. leather etc Metal Otherduring 2007-2008 than this year, the current growth Source: Statistics Lithuania, Swedbankrate of exports in optical instruments is 13.4percentage points higher than in 2010. The share of food and agricultural products in totalAnnual export growth, %; 2011 January-July exports doubled from 11.5% in 2004 to 19.6% in Total except mineral products 2009. However, this sectors growth lagged behind 37.0% Total 38.3% total export growth during the last two years. The Other 71.3% export share of plastics and chemicals has Chemical products 59.5% remained stable after increasing by 6 percentage Transport 56.7% Metal, etc. 43.7% points to 16.0% during 2004-2007. Mineral products 42.7% Optical instruments 40.0% Contribution of main product groups to export growth, pp Pulp and paper 36.6% 50% Other Machines and equipment 35.3% Wood, etc. 34.2% 40% Metal Food and agricultural products 32.4% Furniture 26.2% 30% 6.3% Textiles, wearing, Building materials 25.1% 4.1% 4.0% leather, etc. Textiles, wearing, leather, etc. 20.8% 8.1% 20% 6.9% Plastics 19.2% Chemicals, 18.3% 9.8% 10.3% plastics 10% 0% 20% 40% 60% 80% Machinery , 3.6% 4.2% 5.3% Source: Statistics Lithuania, Swedbank 0% transport Mineral products -9.1% -10%Chemicals and plastics contribution to -6.6% Wood, f urniture -20%export growth has been increasing -4.0% Food -30%There have been no significant changes in the 2008 2009 2010 7M 2011structure of Lithuanian exports – mineral products Total(25.0%), machinery, equipment, and transport Source: Statistics Lithuania, Swedbank(18.9%), chemicals and plastics (15.9%), and foodand agricultural products (15.8%) keep dominating The main contributors to growth during the lastexports. couple of years have been mineral products andThe export share of textiles, wearing apparel, and machinery, equipment, and transport. During theleather has decreased by 6.4 percentage points first seven months of this year, the contribution offrom 2004 and now amounts to only 5.5% of total chemicals and plastics (6.3%) increased the most.exports. The other traditional sectors, such as wood Export of metals, which had been growing by 17-and furniture, have lagged behind total export 44% beginning in 2004 (except for 2009, when theygrowth for the last few years as well, as their share decreased by 31.4%), have contributed to growthdecreased from 11.4% to 7.6%. The share of by 1.5-2 percentage points during last two years. 2 (5)
  • 3. The Lithuanian Economy Economic Research Department, Swedbank No. 7 • 2011 10 04The growth of exports of textiles, wearing apparel, Lithuania currently exports 6.5% of all its exports toand leather products increased to some 21-22% in Belarus. This share has increased from 3.2% in2010, and, this year, this product group’s 2004. However, only 1.1% of goods produced incontribution to growth has increased to 1.3-1.5 Lithuania were exported to this country in the firstpercentage points. half of 2011. Therefore, the current currency crisis in Belarus (the rouble has depreciated by more thanExports to CIS region have been 60% since the beginning of the year) does not poseexpanding; however EU markets will remain a systemic risk to Lithuania’s exports. Nevertheless,the most important to local industry the negative impact on some sectors might beExport to CIS countries expanded the most, as this stronger because of the diminishing purchasingshare increased from 16.3% in 2004 to 28.3% in the power of Belarus.seven months of 2011. The EU countries becamethe destination for a smaller share of total exports; Destination of exports of goods produced in Lithuania, %; 2004-2011(January-July)however, more than half (60.4%) of export goodshave been sold in the EU countries this year (66.9% 100%in 2004). The share of total exports to the EU 90% 29% 33% 34% 33% 32% 36% 33% 32%increased more significantly only in 2009, when 80%total exports fell by 26.6%. 70% 5% 5% 6% 6% 6% 5% 5% 60% 5% 5% 4% 4% 6%Destination of exports, %; 2004-2011(January-July) 7% 9% 6% 6% 7% 6% 7% 6% 50% 6% 6% 6% 6% 7% 8% 8% 40% 6% 6% 5% 100% 6% 7% 5% 7% 5% 6% 6% 7% 30% 5% 6% 8% 9% 8% 90% 24% 6% 6% 31% 31% 29% 28% 30% 29% 27% 14% 20% 11% 11% 11% 9% 12% 12% 13% 80% 3% 10% 9% 8% 9% 11% 10% 8% 7% 8% 70% 4% 4% 4% 5% 5% 4% 3% 4% 5% 5% 6% 5% 5% 5% 5% 4% 0% 60% 5% 4% 5% 4% 5% 2004 2005 2006 2007 2008 2009 2010 2011 50% 5% 5% 6% 5% 6% 6% 7% Russia Latv ia Germany Poland 6% Belarus Estonia Netherlands UK 40% 5% 6% 6% 6% 7% 8% 7% France US Sweden Other 6% 10% 5% 6% 7% 9% Source: Statistics Lithuania, Swedbank 30% 9% 10% 10% 10% 9% 20% 13% 12% 9% 10% 11% 10% 10% 10% 10% 13% 15% 16% 13% 16% 16% Such sectors as building materials, for example, 9% 10% 0% made 15.3% of all its exports to Belarus in the first 2004 2005 2006 2007 2008 2009 2010 2011 half of 2011. This share has decreased from 22.5% Russia Belarus Latv ia Estonia Germany Netherlands Poland UK in 2010; however it was much smaller in previous France United States Sweden Other years (3.5% in 2004). Exporters of building Source: Statistics Lithuania, Swedbank materials therefore might see their product demand dropping more significantly in this previouslyExcept for Russia, the export share to other BRIC expanding market if demand in Belarus were tocountries did not demonstrate a sustainable shrink significantly. Adverse events would have aincrease from 2004. Exports of goods to India, less sizable impact on pulp and paper exports, asChina, and Brazil have constituted only 0.7% of 5.0% of all Lithuanian exports of this sector aretotal exported goods this year (0.3% in 2004). 4.9% made to Belarus. Other sectors rely even less onof all goods were exported to Canada and the US. this foreign market.The main destinations for goods exports have The share of goods exported to Germany, which isremained the same – Russia, Germany, and Latvia. the biggest market for Lithuanian goods, hasThe share of total exports to Russia increased by 4 rebounded back to 9-10% after 2008. Latvia,percentage points, to 16%, this year. However, however, absorbs only 10% of Lithuanian exports,most of this is re-exports of transport, machinery, below the 13% reached during the previousand equipment and, therefore, is not as important economic boom. During 2007-2008, a bigger sharefor the Lithuanian economy. Only 20.4% of total of exports was diverted to Russia as well.exports to Russia have been of Lithuanian origin During 2004-2011 the share of exports to the UKthis year. And a similar situation remains in all the remained the most stable (4-5%); exports to theCIS countries, where this share equals 24.6%. other main export partners fluctuated more. TheThe growth of Lithuanian goods exports to Belarus share of total exports to Poland increased fromdecelerated from 46.5% in 2010 to 34.7% in the first 4.8% to 7-8%; to Belarus, by 3.3 percentage pointshalf of 2011 (compared with same period of 2010). to 6.5%. The export shares to Sweden decreased 3 (5)
  • 4. The Lithuanian Economy Economic Research Department, Swedbank No. 7 • 2011 10 04by 1.7 percentage points to 3.4%; to the US, by 1.3 expectations were barely affected by negative newspercentage points to 3.4%. Frances share in total – they declined by 2 percentage points in Augustexports declined from 6-7% to 3-4%. and by 1 point in September. Retail trade sector confidence declined a little, but still remainsThe EU market’s contribution to annual growth positive.reached 22.6 percentage points in the first half ofthis year (16.6% in 2010). Estonia contributed by far Annual change in retail trade, %, and confidence indicatorsthe most, as its contribution increased to 2.9% from 30-0.3% during 2010. Latvia’s contribution grew 20considerably as well. The CIS countries’ 10contribution to growth increased from 12.4% in 02010 to 15.8% in the first half of 2011. -10Russia, the largest trade partner, which imports -20about 16% of all Lithuanian exports, has been the -30main contributor to exports’ growth. Its contribution -40to annual export growth increased to 8.6 -50percentage points during the first half of this year -60(4.0% in 2005). 2008 2009 2010 2011 Retail trade conf idence indicator Consumer conf idence indicatorContribution of main trading partners to annual goods’ Retail tradeexport growth, pp Retail trade except of motor v ehicles and motorcy cles Retail sale of f ood, bev erages and tobacco 50% Other Source: Statistics Lithuania, Swedbank 41.2% 40% Other CIS 32.7% 7.3% 28.5% 30% Other EU Retail trade in August continued its strong growth. 7.1% 4.9% 9.9% 20% 8.1% Retail trade, except for motor vehicles, increased by 9.3% PL 10.1% - the highest pace in more than three years. 8.6% 10% 5.7% 7.5% DE Even consumption of food, beverages, and tobacco -26.6% 0% 4.2% increased by 1.8%, after stagnating during the first -4.2% RU -6.3% seven months of this year. -10% -7.8% EE -20% It is likely that this strong growth was a LV consequence of two important recent reforms -30% fighting the shadow economy – the introduction of Total -40% cashiers in food markets and restrictions on border 2008 2009 2010 6M 2011 crossings with a full tank of fuel (now limited to five Source: Statistics Lithuania, Swedbank entries per month). The plan to expand the reform and introduce cashiers in all the markets wouldIt is not likely that export growth rates will remain as further lower shadow economy and have a positivehigh as they are now. The pace of increase in pact on retail trade and GDP numbers.exports will probably be declining in the nearest Lithuanian economy is much better positioned tofuture due to weaker growth in the EU countries – meet global turmoil than it was in 2008. Butthe main destination for Lithuanian products. The memories of frequent defaults, high risk andindustrial confidence indicator dropped by 9 rampant uncertainty are still very fresh. Any news ofpercentage points in September, the lowest level upcoming economic slowdown is met withsince the end of 2010. The main reasons behind pessimism and fear. A renewed recession in eurothis rapid decline were lower orders and export area and U.S. would encourage Lithuanianexpectations. households to increase savings and cut spending;Household consumption picks up the whereas companies are likely to cautiously reassess their investment plans.baton, but the risk of confidence loss ishighThe slower growth of exports will have negative Nerijus Mačiulisconsequences for overall economic growth and the Vaiva Šečkutėforeign trade balance. For now, households seemto be willing and able to offset the negative impactof dwindling foreign demand. Household 4 (5)
  • 5. The Lithuanian Economy Economic Research Department, Swedbank No. 7 • 2011 10 04SwedbankEconomic Research Department Swedbank’s monthly newsletter The Lithuanian Economy is published as a service to ourSE-105 34 Stockholm customers. We believe that we have used reliable sources and methods in the preparationPhone +46-8-5859 1028 of the analyses reported in this publication. However, we cannot guarantee the accuracy orek.sekr@swedbank.com completeness of the report and cannot be held responsible for any error or omission in thewww.swedbank.com underlying material or its use. Readers are encouraged to base any (investment) decisions on other material as well. Neither Swedbank nor its employees may be held responsible forLegally responsible publisher losses or damages, direct or indirect, owing to any errors or omissions in Swedbank’sCecilia Hermansson, +46-8-5859 7720. monthly newsletter The Lithuanian Economy.Nerijus Mačiulis, +370 5 2582237.Lina Vrubliauskienė +370 5 258 2275.Vaiva Šečkutė, +370 5 258 2156. 5 (5)

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