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Home Services COVID-19 News for Business Impact on Business Lithuanian export forecasts: from simplistic joy to shock models

Lithuanian export forecasts: from simplistic joy to shock models

Although the Lithuanian export growth rate slowed down in 2019, the country’s exporters still had something to enjoy. All of us have a different mood this spring – the coronavirus COVID-19 pandemic is disrupting business plans and destroying even the most cautious forecasts. 

On Thursday, this issue was discussed at a remote web conference, “Lithuanian Exports in the Presence of the Coronavirus: Trends and Forecasts,” organized by the agency Enterprise Lithuania.

The lion’s share is for the export of goods of Lithuanian origin

According to the Lithuanian Department of Statistics, in 2019, export volumes of products from Lithuania grew by 4.7 percent and reached EUR 29.6 billion, almost half of them were goods of Lithuanian origin (48.6 percent), 38.6 percent – re-export, and 13.2 percent – energy products. As predicted by analysts of Enterprise Lithuania, annual export growth was slower in comparison to 2018, when it reached 7.3 percent.

“This process was determined not only by the downturn in growth in major Western European markets and China, but also by the uncertainty about Brexit processes, and the higher comparative base in comparison to a year ago”, – said Vadimas Ivanovas, head of Research and Analysis Department at the conference of Enterprise Lithuania.

Last year Lithuanian export dynamics were mostly stimulated by a 6.1 percent increase in exports of goods of Lithuanian origin, which generated EUR 14.4 billion. Its fastest growth rate was in the first quarter of 2019- 10.1 percent, accounting for 6.2 percent and 6.5 percent in the second and third quarters, respectively. The slowest growth rate was recorded in the last quarter, which was 2.1 percent.

“Looking at the prism of export volumes and prices, it can be seen that almost all growth in export value of goods of Lithuanian origin was determined by increased volumes, while the impact of export prices was relatively small in the first quarter and negative in the last quarter”, – noted V. Ivanovas.

In 2019, 2931 companies registered in Lithuania benefited from the export promotion services of Enterprise Lithuania, which exported EUR 7.5 billion’s worth of goods, which accounts for about 25 percent of the country’s total exports of goods. It is estimated that last year the value of contracts concluded by the clients of Enterprise Lithuania amounted to EUR 29.6 million, and this figure has more than doubled compared to the previous year. In 2019 export volumes of the clients of Enterprise Lithuania increased by 7.8 percent (19 percent faster than the overall growth of the country’s export of goods), while products of Lithuanian origin – 6.6 percent (8 percent faster than the country’s overall growth).

Flows to target markets increased

In 2019, the agricultural sector contributed the most to increase export volumes, generating 2.2 percent of the total annual growth and more than one-third of value growth. The biggest contributor to this was the grain harvest, which was about one fifth higher than last year and which allowed to increase the export of Lithuanian products to the target markets by one third. Last year’s grain export value was 2.9 times higher than a year ago and amounted to EUR 250 million. Exports reached this to the PAR market, which increased by 8.2 times, exports to Turkey, which increased by 2.1 times, as well as exports to China and accelerated exports to Israel.

During 2019 the consolidated value of Lithuanian origin exports to target markets increased by 6.6 percent up to EUR 7.3 billion and exceeded the overall growth. The Dutch and German markets contributed the most to the growth, generating 1.6 and 1.5 percent of total growth, respectively (mainly due to exports of furniture and rape to the Netherlands, and furniture to Germany).

“It was the export of furniture after grain that contributed the most to the positive result and generated 1.5 percent of total growth, and we exported these products to our target markets for EUR 1.4 billion”,- mentioned V. Ivanovas.

“It is important to note that last year the export of high-tech goods increased by 7.6 percent or, 1.5 percent faster than the total export of products of Lithuanian origin, and which amounted to EUR 1.1 billion. Exports of electrical machinery and equipment to Norway, Italy, and the Netherlands have increased significantly,” noted V. Ivanovas.

During 2019 the value of re-export of goods from Lithuania increased by 7.1 percent and amounted to EUR 11.3 billion. Exports of energy products contracted by 6.1 percent and amounted to EUR 3.9 billion.

Shock models in the forecast of 2020

Already at the end of last year, Enterprise Lithuania analysts paid attention to increasing signs of a cyclical downturn in the global economy and mitigated the forecasts of growth for 2020, highlighting a number of risk factors. However, the COVID-19 outbreak, which has become a global pandemic, has broken even cautious forecasts.

“Under the current circumstances, we are thinking of several possible shock scenarios of foreign demand, which are structurally similar, and differ only in the extent of the potential impact on Lithuanian exports. However, we are already talking about the moderate or strong impact on our country’s exporters”, said Rasa Uždavinytė, Head of Export Department of Enterprise Lithuania.

According to her, under current assumptions, the negative foreign demand shock will continue throughout 2020, with the largest negative effects expected in the second and third quarters. It is also assumed that economic growth in many EU countries – Lithuania’s main export partners – will be negative. Italy is expected to have the largest negative GDP fall, but recessions are also expected in Germany, Spain, France, and many other EU countries.

“According to the currently simulated scenarios, the contraction of exports of goods of Lithuanian origin could reach from 2 to 17.2 percent this year, instead of 4.3 percent of previously planned growth. In absolute terms, this would mean a decrease in the value of exports of goods of Lithuanian origin from about EUR 291 million up to EUR 2.474 billion compared to an actual indicator of 2019.

Even more challenging is the situation in the export of services, where the contraction can reach from 10.4 to 25.4 percent or from about EUR 1.199 billion to EUR 2.925 billion instead of the planned 4.7 percent of growth”, revealed V. Ivanovas.

The biggest decline in nominal exports is expected in the food and beverage industry, manufacture of furniture, agriculture, as well as travel services and transport.

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