Lithuanian economy 2008-2012, Nerijus Mačiulis, Chief economist, Swedbank

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Outlook of Lithuanian economy from 2008 until 2012 and looking forward. Lithuania emerged from the deep recession more balanced and effective, with lower private sector financial leverage and tangible competitive advantages. However there remain areas which require more reforms and improvements - labour market flexibility, efficiency of procurement process, better functioning financial markets and overall better political environment.
This Outlook was presented to Lithuanian Investment Advisory Council (http://www.iac.lt/)

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Lithuanian economy 2008-2012, Nerijus Mačiulis, Chief economist, Swedbank

  1. 1. Lithuanian economy 2008-2012Nerijus Mačiulis, Chief economist, Swedbank © Swedbank
  2. 2. The effects of global financial crisis were severe, butreforms and adjustments were quick and efficient GDP index, peak=0 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 0.0 -5.4 -5.0 -7.3 -10.0 -14.3 -15.0 -16.2 -19.1 -20.0 -25.0 -23.9 Euro zone Estonia Latvia Lithuania -30.0 Source: Eurostat and Swedbank forecasts © Swedbank
  3. 3. Manufacturing at new highs Growth in manufacturing, sa, 3 month moving average, Janaury 2008=100 110 105 100 95 Lithuania 90 Latv ia Estija 85 Sweden Euro area 80 75 70 65 2008 2009 2010 2011 2012 Source: Reuters Ecowin, Statistics Lithuania © Swedbank
  4. 4. Example of successful internal devaluation –adjustment was achieved without currency devaluation Real unit labour costs, index 2000=100120115110 Czech Republic Germany105 Estonia100 Greece France95 Latvia Lithuania9085 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f 2013f Source: Eurostat © Swedbank
  5. 5. Trade surplus at a record high Current Account Balance, % of GDP 15% 10% 4.8% 5% 3.1% 0% -5% -10% -15% -20% -25% 2007 2008 2009 2010 2011 2012 Balance of goods and serv ices, % of GDP Balance of goods, % of GDP Balance of current account, % of GDP Source: Bank of Lithuania, Swedbank © Swedbank
  6. 6. GDP growth has probably bottomed out in thesecond quarter of this year Contributions to GDP grow th Contributions to GDP Grow th 15% 8% 5.9% 5.9% 6.5% 4.4% 6% 10% 6.7% 3.9% 2.2% 4.1% 4.5% 4.8% 3.3% 5% 4% 1.4% 0.9% 0.8% 0% 2% -0.9% 0% -5% -10% -2% -15% -4% 2010 2011 2012 2010 2011 2012f 2013f 2014f Household consumption Gov ernment consumption Household consumption Gov ernment consumptio Inv estment (excl.inv ent.) Inv entories Inv estment (excl.inv ent.) Inv entories Net export GDP growth Net export GDP growth Source: Statistics Lithuania, Swedbank Sources: SL, Swedbank © Swedbank
  7. 7. Exports boom despite recession in euro area Export of goods and services, LTL m illions 8000 4000 7000 3500 Exports of goods (ls) 6000 3000 5000 2500 Exports of goods 4000 2000 produced in Lithuania (ls) 3000 1500 2000 1000 Exports of serv ices (rs) 1000 500 0 0 2007 2008 2009 2010 2011 2012 Sources: Statistics Lithuania, Bank of Lithuania © Swedbank
  8. 8. Confidence was increasing throughout the year,but recently dropped, mainly due touncertainties in euro area Confidence Indicators 40 Overall sentiment 20 Industry (40%) 0 Construction (5%) Retail trade (5%) -20 Services (30%) -40 Consumer (20%) -60 -80 2010 2011 2012 Source: Statistics Lithuania © Swedbank
  9. 9. Unemployment at the lowest level since thebeginning of 2009 Registered unemployment and vacancies40% 16% 3535% 15% 3030%25% 14% 2520% 13% 2015% 13.3%10% 12% 15 5% 11% 10 0% 2007 2008 2009 2010 2011 2012 10% 5 Unemployment rate 9% 0 The youth (aged 15–24) unemployment rate 2010 2011 2012 Long-term unemployment rate Registered unemploy ment Registered v acancies thous. (rs) Source: Statistics Lithuania Source: Lithuanian Labour Exchange © Swedbank
  10. 10. One of the fastest declines of unemployment in EU12 30 24.7 23.510 258 20 15.9 15.5 14.8 13.3 13.76 12.2 15 10.9 10.6 10.1 10.1 10 10.1 8.2 7.6 7.6 8.2 8.1 84 6.7 7.1 7.2 10 5.5 6.1 5.3 5.12 50 0 UK Finland Italy* Estonia Lithuania Romania Bulgaria Latvia Hungary United Poland Spain France Malta Slovenia Slovakia Portugal Belgium Czech States Cyprus Ireland Netherlands Denmark Greece Sweden Luxembourg Germany-2 -5-4 -10 Change in unemployment in 2012 Q2 compared with 2011 Q1 Unemployment rate in 2012 Q2 (RS) * Last observation for Italy 2012 Q1 Source: Eurostat, Sw edbank © Swedbank
  11. 11. Public finances continue to improve,debt will peak at 40% of GDP this year General Governm ent Finances, % of GDP 0% 48% -0.5%-0.4% -2% -1.0% -1.0% 40% -1.3%-1.5% -2.0% -4% -3.0% 32% -3.3% -6% 24% -5.5% -8% 16% -7.2% -10% 8% -9.4% -12% 0% 2003 2005 2007 2009 2011 2013f Debt (rs) Budget position (ls) Source: Lithuanian MoF, Swedbank calculation © Swedbank
  12. 12. Private sector has deleveraged significantly Total debt, % GDP 120% 100% 19.8% 4.5% 44.6% 80% 6.4% 15.5% 41.5% 44.2% 60% 42.9% 35.1% 31.4% 31.9% 40% 24.9% 46.8% 40.9% 20% 39.8% 26.9% 31.5% 23.3% 0% 2008 1H 2012 2008 1H 2012 2008 1H 2012 Lithuania Latvia Estonia Households Non-financial corporations Public sector (1Q 2012) © Swedbank
  13. 13. The confidence of financial marketsis at all time high 10 year CDS 800 Lithuania 750 Italy 700 Germany 650 United States 600 550 500 450 400 350 300 250 200 150 100 50 0 08 09 10 11 12 © Swedbank Source: Reuters EcoWin
  14. 14. Investments in fixed tangible assets stagnateFDI inflow in Lithuania, m LTL Investm ent in fixed tangible assets, % GDP2500 10 30% 60% 26%2000 5.9 6.7 8 20% 19% 20% 18% 17% 18% 3.8 2.73.9 4.3 3.8 20% 40%1500 3.6 6 14% 13% 4.1 0.7 3.6 2.0 11% 12% 11% 12% 12% 12% 3.5 9% 10%1000 4 10% 7% 20% 500 2 -3.2 0 0% 0% 0 -500 0.7 -2 -10% -20%-1000 -1.4 -4 -3.1 -2.5 -20% -40%-1500 -6-2000 -8 -30% -60%-2500 -10 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Construction, % GDP Equipment, machinery % GDP Equity and other capitals Reinv ested earnings Other, % GDP Inv estment, y oy (rs) FDI, % of GDP (rs) Total inv estment, % GDP Source: Statistics Lithuania, Swedbank Source: Bank of Lithuania, Swedbank calculations © Swedbank
  15. 15. Global competitiveness report: advantages 0 Malaria cases Business impact of malaria 5 Trade tariffs Flexibility of w age Women in labour force Top 10 determination 10WEF GCR ranking Mobile telephone HIV prevalance subscriptions Tertiary education Quality of math and 15 enrollment science education Quality of railroad infrastructure Business costs of 20 Top 20 Internet access Imports as percentage terrorism Business impact of FDI and technology in schools of GDP HIV/AIDS Pay and productivity transfer 25 University-industry Degree of customer Quality of primary collaboration in R&D orientation education 30 Intl Internet bandw idth Top 30 35 Higher education Goods market Infrastructure Health and primary education Labour market Institutions and training efficiency efficiency TechnologicalSource: WEF Global competitiv eness report 2012-2013 readiness Innovation © Swedbank
  16. 16. Global competitiveness report: disadvantages 94 Available airline seat Worst 50 99 Effectiveness of anti- Govt procurement of monopoly policy advanced tech products 104 Burden of geovernment Ease of access to loans Worst 40 109 regulation Redundancy costsWEF GCR ranking Government budget Buyer sophistication 114 Public trust in politicians balance State of cluster Brain drain development Worst 30 119 Business impact of rules Hiring and firing practices on FDI 124 Worst 20 Extent and effect of 129 taxation 134 Worst 10 139 144 Macroeconomic Financial Business Institutions Labour market efficiency Goods market efficiency Innovation environment market sophistication developmen InfrastructureSource: WEF Global competitiv eness report 2012-2013 © Swedbank
  17. 17. Thank you!To subscribe to our reports:http://www.swedbank-research.com© Swedbank

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