Economy of Lithuania

Economy of Lithuania

The Lithuanian economy today is based on capitalist free market principles, and has enjoyed high growth rates in the last decade as it entered the European Union together with other Baltic states. The government pursues a flat tax and the unemployment rate is fairly low; these and other policies have led to the notion of a Baltic Tiger, including the economy of Lithuania.

Lithuania has been in transition from the communist planned economy in the Soviet Union, when it also conducted most of its trade with Russia. However, it faced its own economic and financial crisis in 1999 partly due to the August 1998 Russian financial crisis, and has since reoriented itself towards the EU.

In 2005 the GDP grew by 7.5%, and the inflation rate was 3%.


The Soviet era brought Lithuania intensive industrialization and economic integration into the U.S.S.R., although the level of technology and state concern for environmental, health, and labor issues lagged far behind Western standards. Urbanization increased from 39% in 1959 to 68% in 1989. From 1949-1952 the Soviets abolished private ownership in agriculture, establishing collective and state farms. Production declined and did not reach pre-war levels until the early 1960s. The intensification of agricultural production through intense chemical use and mechanization eventually doubled production but created additional ecological problems. This changed after independence, when farm production dropped due to difficulties in restructuring the agricultural sector.

The economy of independent Lithuania had a slow start, as the process of privatization and the development of new companies slowly moved the country from a command economy toward the free market. By 1998, the economy had survived the early years of uncertainty and several setbacks, including a banking crisis, and seemed poised for solid growth. However, the collapse of the Russian ruble in August 1998 shocked the economy into negative growth and forced the reorientation of trade from Russia toward the West.

The 1999 crisis was the result of the government's wrongfooted economic policies and its inadequate response to the August 1998 Russian financial crisis. The policies that Prime Minister Andrius Kubilius implemented upon taking the helm in November 1999 underscore a commitment to fiscal restraint, economic stabilization, and accelerated reforms. The austere 2000 budget was based on a 2% GDP growth forecast, 3% inflation, and a 2.8% budget deficit.

Lithuania was invited at the Helsinki EU summit [ [ General Report 1999 (en): - Chapter V: Enlarg ] ] in December 1999 to begin EU accession talks in early 2000.

Since the Russian monetary crisis, the focus of Lithuania's export markets has shifted from East to West. In 1997, exports to former Soviet states made up 45% of total Lithuanian exports. In 2005, exports to the East were only 18% of the total, while exports to EU members amounted to 65%.

Exports to the United States make up 4.7% of all Lithuania's exports, and imports from the United States comprise 2% of total imports. Foreign direct investment (FDI) in 2005 was 2.6 billion litas, which represented an increase of only 4.6% compared to the same period in the previous year.

On February 2, 2002, the government re-pegged the Litas from the U.S. dollar to the Euro at the rate of 3.4528 Litas for 1 Euro. The re-peg, which went smoothly, reflects a change in trade orientation and was meant to help Lithuania prepare for membership in the EU Economic and Monetary Union. However, with the appreciation of local currency against the U.S. dollar, the production costs of enterprises have been decreasing, and competitiveness increasing.

Current situation

Lithuania became a member of the EU on May 1, 2004.

The transport infrastructure inherited from the Soviet period is adequate and has been generally well maintained since independence. Lithuania has one ice-free seaport, Klaipėda, with ferry services to German, Swedish, and Danish ports. There are a few commercial airports; scheduled international services use the facilities at Vilnius, Kaunas, and Klaipėda. The road system is well developed, including the Via Baltica highway passing through Kaunas.

Border facilities at checkpoints with Poland were significantly improved with the help of EU funds, but long waits had been a frequent phenomenon until 21 December 2007 when the Schengen Agreement came in force in both countries. Telecommunications have improved greatly since independence as a result of heavy investment. There are currently three large companies providing mobile phone services. [] [] [] .

The Vilnius Stock Exchange is the only official stock exchange of Lithuania.

The minimum wage currently stands at 800 litas (€231). The average wage in 2008 Q2 was 2237LTL (€648)


GDP:purchasing power parity - $48.49 billion (2005, IMF)

GDP - real growth rate:10,8% (2007 Q3)

GDP - per capita:purchasing power parity - $17,661 (2007 est., IMF)

GDP - composition by sector:
* "agriculture:" 6.1%
* "industry:" 33.4%
* "services:" 60.5% (2004 est.)

Investment (gross fixed):21.9% of GDP (2004 est.)

Population below poverty line:NA

Average net earnings of employ­ees in the whole economy€268 (2005 est.)

Household income or consumption by percentage share:
* "lowest 10%:" 3.1%
* "highest 10%:" 25.6% (1996)

Distribution of family income - Gini index:31.9 (2000)

Inflation rate (consumer prices):3.0% (2005 est.)

Labor force:1.607 million (2005 est.)

Labor force - by occupation:
* "agriculture:" 14%
* "industry:" 29%
* "services:" 57% (2005 est.)

Unemployment rate:4.1% ( Q2 2007 ), [ Eurostat] )

* "revenues:" $7.498 billion (2007 forecast)
* "expenditures:" $7.121 billion, including capital expenditures of NA (2004 est.)

Public debt:25.2% of GDP (2004 est.)

Agriculture - products:grain, potatoes, sugar beets, flax, vegetables, beef, milk, eggs, fish

Industries:biotechnology, metal-cutting machine tools, electric motors, television sets, refrigerators and freezers, petroleum refining, shipbuilding (small ships), furniture making, textiles, food processing, fertilizers, agricultural machinery, optical equipment, electronic components, computers, amber

Industrial production growth rate:7.3% (2005 est.)

* "production:" 19.27 TWh (2004)
* "consumption:" 10.51 TWh (2004)
* "exports:" 7.20 TWh (2004)

Electricity - production by source:
* "fossil fuel:" 16.75%
* "hydro:" 4.85%
* "other:" 0%
* "nuclear:" 78.4% (2004)

* "production:" 4,594 barrel/day (2001 est.)
* "consumption:" 72,000 barrel/day (2001 est.)
* "exports:" NA
* "imports:" NA

Natural gas:
* "production:" 0 m³ (2001 est.)
* "consumption:" 2.76 billion m³ (2001 est.)
* "exports:" 0 m³ (2001 est.)
* "imports:" 2.76 billion m³ (2001 est.)

Current account balance:$-1.6 billion (2004 est.)

Exports:€11.24 billion (2006)

Exports - commodities: (2001)
* "mineral products 23%"
* "textiles and clothing 16%"
* "machinery and equipment 11%"
* "chemicals 6%, wood and wood products 5%"
* "foodstuffs 5%"

Exports - partners: (2005 est.)
* EU 65.4%
* Russia 10.4%
* Latvia 10.3%
* Germany 9.4%
* France 7.0%
* Estonia 5.9%
* Poland 5.5%
* Sweden 5%.

Imports:€15.37 billion (2006)

Imports - commodities: (2001)
* "mineral products 21%"
* "machinery and equipment 17%"
* "transport equipment 11%"
* "chemicals 9%"
* "textiles and clothing 9%"
* "metals 5%"

Imports - partners: (2005 est.)
* EU 59.1%
* Russia 27.8%
* Germany 15.2%
* Poland 8.3%
* Latvia 3.9%
* Netherlands 3.7%

Reserves of foreign exchange & gold:€3.3 billion (2006 est.)

Debt - external:€10.463 billion (2005 end est.)

litas (LTL)

Exchange rates:litai per US dollar - 2,447900 (2007), 2.8157 (2004), 3.0609 (2003), 3.677 (2002), 4 (2001), 4 (2000)

Fiscal year:calendar year


ee also

* []
* [ Lithuania's Department of Statistics]
*Economy of Europe

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