Lithuania maintains a relatively stable and diversified economy, characterized by a robust industrial sector, active participation in international trade, and integration with the European Union. The country has experienced positive economic growth in recent years, coupled with efforts to enhance innovation and digitalization. However, challenges such as high inflation rates and vulnerabilities to external factors, especially in the context of the war in Ukraine, pose considerations for sustained economic stability. Overall, while Lithuania has made strides in economic development, ongoing global dynamics contribute to both opportunities and challenges for its economic performance.
Is Lithuania an advanced economy?
Lithuania stands as a member of the European Union, demonstrating its status as an advanced economy within the group of nations with very high human development. Additionally, Lithuania holds membership in the WTO and OECD, further affirming its position as a progressive and economically developed country. During the 1990s, Lithuania swiftly transitioned from a centrally planned economy to a market-oriented one, introducing a series of liberal reforms. The country experienced robust economic growth following its accession to the European Union, alongside the other Baltic states, earning the collective term "Baltic Tiger" to denote their remarkable economic success.
Economy of Lithuania: ranking 2022-2023
As of 2022, the global gross domestic product per capita averaged around 12,607 USD. In Lithuania, however, the GDP per capita surged to USD 24,827, totaling 70.33 billion USD for the entire country, securing Lithuania's position as the 82nd largest economy globally. When factoring in purchasing power parity per inhabitant, Lithuania claims the 35th spot among the world's wealthiest nations.
In terms of inflation, Lithuania recorded a rate of approximately 19.71% in 2022, significantly higher than the European Union's average of 8.83% for the same year. In comparison, the United States reported a slightly lower inflation rate at 8.00%.
The perceived corruption index in Lithuania's public sector stands at 62.
The nominal gross domestic product (GDP) for the year 2023 is currently at $78.346 billion, while the purchasing power parity (PPP) measure stands at $137.389 billion. In terms of GDP rankings, the country holds the 78th position for nominal GDP and the 88th position for GDP based on PPP in 2023.
The GDP growth rates over the recent years depict a positive trend, with a growth of 4.94% in 2021, an observed 1.84% in 2022, and growth of 2.59% in 2023.
Estimating GDP per capita for the year 2023, the current nominal GDP per capita is $28,094, positioning the country at the 40th rank.
How is Lithuanian economy affected by the Ukraine war?
The economic repercussions of the war in Ukraine have placed Lithuania under significant strain, marked by an unprecedented inflation rate exceeding 22% in September. This surge is primarily attributed to soaring energy prices, accentuated by the country's high energy intensity and a disproportionate reliance on oil and gas in its energy mix. Despite efforts to diversify energy sources by discontinuing Russian energy imports, Lithuania's vulnerability remains, as Russia persists as a major trading partner. In response, the government has implemented a fiscal package to shore up household incomes and enhance energy independence.
What percentage of the economy is tourism?
Tourism plays a vital role in Lithuania's economic landscape. In 2020, the direct contribution of tourism to Lithuania's Gross Value Added (GVA) declined to 1.7% from 2.9% in 2019. The sector employed 45,769 people in 2020, constituting 4.7% of the total workforce, with a decrease of 5,619 jobs compared to the previous year.
Despite the challenges posed by the pandemic, there was a modest recovery in international tourism in 2021. Lithuania welcomed 948,000 international tourists, marking a 1.2% increase from 2020 but remaining 67% below pre-pandemic levels. These visitors contributed to 1.2 million nights and an expenditure of EUR 494 million, accounting for 3.9% of service exports in 2021.
Latvia emerged as Lithuania's primary market source in 2021, with 180,000 overnight visitors, followed by Poland, Germany, Belarus, and Russia. However, the geopolitical situation, particularly Russia's war in Ukraine, introduced uncertainties impacting Lithuania's tourism recovery.
Amidst these challenges, domestic tourism gained prominence, showcasing resilience and adaptability. In 2020-21, domestic tourism became the primary market, contributing to 54.6% of tourism expenditure in 2020, a notable increase from 40.5% in 2019. The year 2021 witnessed 3.1 million overnight domestic tourist trips, reflecting a 26.7% surge compared to 2020 and surpassing pre-pandemic levels by 9.3%.
European Union circular economy of Lithuania
As the European Union introduces new directives on recycling and the circular economy, Lithuania is actively working to align with these guidelines and set ambitious targets. While studies indicate that Lithuania surpasses the EU average in certain aspects, there is acknowledgment that there's still room for improvement. Foreign specialists visit the country to understand its deposit system, and government support programs incentivize businesses to minimize waste and maximize recycling efforts.
The potential of the circular economy in Lithuania, aligned with the broader EU goals of achieving a climate-neutral economy by 2050 and decoupling economic growth from resource use, suggests a comprehensive impact across all economic activities and sectors. Formulating both long-term (until 2050) and short-term (until 2030) objectives is crucial for transforming Lithuanian industry into a circular economy. These long-term goals align closely with the EU's industrial transformation objectives, focusing on full circularity, competitiveness, and climate neutrality.
Initiated by the Ministry of Economy and Innovation at the end of 2021, a compass outlining the transition of Lithuanian industry to a circular economy was developed. The Lithuanian Government's program aims to achieve a circularity index value not lower than the EU average. In 2021, Lithuania's circularity rate stood at 4%, according to Eurostat, contrasting with the EU average of 11.7%.
Enhanced interinstitutional cooperation is deemed essential in this domain to facilitate more detailed monitoring and analysis of circular economy indicators at the national level. This could encompass comprehensive services for businesses, including guidance on regulatory changes, financial support, promotion of circular and green technologies, encouragement of innovative business models, public awareness campaigns, and international networking.
Estonia vs Lithuania economy
Both countries utilize the euro as their currency, where 1 EUR is equivalent to 100 cents.
Estonia reports a slightly higher unemployment rate at 5.9%, while Lithuania stands at 5.6%.
Inflation rates are close, with Estonia at 19.40% and Lithuania at 19.71%.
The cost of living is lower in Lithuania, with a score of 59.19%, compared to Estonia's 71.46% (USA = 100%).
Commercial taxes and contributions are also lower in Lithuania, standing at 42.60%, while Estonia reports a higher rate of 47.80%.
Average income in Estonia is higher at 27,640 US$, whereas Lithuania reports a slightly lower average income of 23,690 US$.
In terms of government debt, both central and general, Estonia shows lower percentages of GDP than Lithuania. Central government debt is 18.83% in Estonia compared to 37.59% in Lithuania, and general government debt is 17.16% in Estonia, while Lithuania reports 39.56%.
The corruption index, indicating the level of corruption, is higher for Estonia at 26 (considered good), while Lithuania has a slightly lower score of 38 (moderate).
Lithuania vs Spain economy
Both countries use the euro as their currency, with 1 EUR equal to 100 cents in both cases.
Spain reports an unemployment rate of 13.0%, while Lithuania boasts a lower rate at 5.6%.
Inflation rates show a significant difference, with Spain at 8.39% and Lithuania experiencing a higher rate of 19.71%.
When it comes to the cost of living, Lithuania scores lower with 59.19% compared to Spain's 72.96% (USA = 100%).
Commercial taxes and contributions are also lower in Lithuania, standing at 42.60%, while Spain reports a higher rate of 47.00%.
Average income in Spain is higher at 31,680 US$, whereas Lithuania reports a lower average income of 23,690 US$.
In terms of government debt, both central and general, Lithuania shows lower percentages of GDP than Spain. Central government debt is 37.59% in Lithuania compared to 102.25% in Spain, and general government debt is 39.56% in Lithuania, while Spain reports 111.98%.
The corruption index, indicating the level of corruption, is 40 (considered moderate) for Spain and slightly lower at 38 (also moderate) for Lithuania.