Analysts of Enterprise Lithuania: last year the jump of exports of goods was highest during 5 years
According to the analysts of Enterprise Lithuania, the year 2017 could be characterized by particularly good trends in global economy and main Lithuania’s export markets: last year the economies of the largest European Union (EU) countries grew, Russia’s imports recovered, and the prices of exported goods increased. All the above boosted the sales of Lithuanian companies in export markets.
On the basis of the data of Statistics Lithuania, in 2017, the overall exports of goods grew by 16.9 per cent over a year, which is the most rapid increase since 2012. Exports of goods of Lithuanian origin (excluding energy products) increased by 12.8 per cent, which was a slightly bigger increase than forecasted by the analysts of Enterprise Lithuania.
The value of exports of goods of Lithuanian origin was increased by both higher prices of exported goods and bigger quantities. The year recorded the biggest increase in the prices of energy products, tobacco and food products. The prices of engineering industry products, except for metals, slightly decreased. “The impact of prices was more important in the first quarter of 2017, when oil product prices saw the most rapid increase over a year (in early 2016, oil prices were lowest), whereas in subsequent quarters the growth of export volumes became a more important factor,” says Vadimas Ivanovas, the Chief Analyst of Enterprise Lithuania.
According to industry sectors, engineering industry, food and beverage industry as well as furniture and wood sectors had the highest impact on the growth of exports of goods made in Lithuania (excluding energy products). These sectors accounted for almost 70 per cent of the growth of exports of goods of Lithuanian origin (excluding energy products).
In 2017, current foreign markets were the key directions of export development of companies. Engineering industry increased exports to the Swedish, German, Russian, Polish and Dutch markets. The biggest growth was recorded in the exports of vehicle ignition wiring, semi-trailers and products from plastic.
Food and beverage industry more exported to the German, Polish, Italian, Latvian and Belgian markets. Exports of dairy products, fish and products of the milling industry (gluten, malt, flakes) recorded the highest growth, whereas the export value of beverages saw the biggest decrease.
The development of exports of furniture and wood products was targeted at the Swedish, US, Latvian, Danish and French markets. The greatest growth was recorded in the exports of furniture, processed wood in the rough as well as wooden containers and pallets.
2018 – the year favourable for investments in the development of production capacity
According to the analysts of Enterprise Lithuania, favourable global economic trends will precondition further development of exports. Various international institutions foresee that the growth of global economy this year will be the most rapid since 2011. Historically high indicators of economic confidence in the euro area and US markets have affected the accelerated growth of global economy and a more intensive global trade already since 2016. Furthermore, the conditions of business crediting improved, whereas the unemployment rate almost reached the pre-crisis level in developed countries.
The main partners of Lithuania’s exports – the EU and Russia – are also forecasted favourable economic development. The EU market should grow by 2.1–2.3 per cent, whereas Russia is foreseen to record a 1.6–2 per cent economic growth. More than two-thirds of goods made in Lithuania and intended for export are exported to the EU, whereas Russia is the largest market for Lithuanian companies that are involved in re-exporting activities.
“However, this year the growth of Lithuania’s exports should be slower than last year. This is mainly influenced by a tense situation in the Lithuanian labour market and the effect of comparative base. The unemployment rate remains rather high in Lithuania – it was 7.1 per cent in 2017, while the employment rate was not growing and even slightly decreased last year. Meanwhile the growth of wages has been rapid. These factors reveal the structural problems of the labour market, i.e. the lack of workers of adequate qualification. A rapid increase in labour costs might negatively affect the country’s competitiveness in foreign markets in the long run,” says Mr. Ivanovas.
The chief analyst at Enterprise Lithuania also notes that historically the level of utilization of production capacity in Lithuania was highest last year.
“It shows that investments in the development of production are particularly important at present, and the overall macroeconomic environment as well as lending conditions are favourable. Unless the companies resolve to invest in the improvement of production capacity, this might also have a negative impact on the country’s competitiveness in foreign markets in the long run,” adds Mr. Ivanovas.
More information on this topic
According to the overview presented by the analysts of Enterprise Lithuania, the international economic environment has been currently particularly favourable for Lithuanian exporters, thus Lithuanian exports will maintain the growth rates and only internal factors such as a tense situation in the labour market and lack of production capacity will hinder development in foreign markets.
Contribution to the world defence industry is a rather new direction for Lithuanian enterprises. As the defence budgets are recovering worldwide and rivalry among industry players is growing, Lithuanian companies have more global opportunities to establish themselves as suppliers not only for Lithuanian Armed Forces, but also for foreign counterparts. One of the most promising target markets is the US aerospace and defence industry. Prospects for cooperation between Lithuanian and American companies were discussed at the US-Lithuanian defence forum in Vilnius held on March 1 and organized by Enterprise Lithuania and American-Lithuanian Business Council.