The Lithuanian Economy - August 2016
Is the Lithuanian manufacturing sector losing steam?
  • Some industries are winning, some are losing
  • Export performance – a mixed picture
  • Sustaining competitiveness is becoming challenging

Some industries are winning, some are losing

In the second quarter of this year, manufacturing growth numbers suddenly turned negative, raising questions of whether the Lithuanian manufacturing sector is losing steam. It is probably still too early to wave the red flag - the main reasons behind the decline were related to the difficulties facing some specific sectors, as well as some one-offs. However, recent trends indicate that a part of the manufacturing sector could actually be losing competitiveness.

Export performance – a mixed picture

Export performance in the first half of this year was negatively affected by competitiveness issues in some industries, as well as shrinking export prices. Although confidence indicators suggest that export growth should recover going forward, there is not much room for optimism. The dairy industry is having a hard time returning to the growth path, but the opening up of the Chinese market could deliver a much-needed boost. Exports of goods of Lithuanian origin were growing most rapidly to the UK, the Scandinavian countries, the US, Japan, the UAE, and Saudi Arabia, but exports to Germany and some other EU countries as well as the CIS countries were disappointing.

Sustaining competitiveness is becoming challenging

The Lithuanian companies’ assessment of their competitive position inside the EU and in non-EU markets declined in the second quarter of this year. Price competitiveness was negatively affected by an appreciation of the real effective exchange rate. Meanwhile, rapidly rising unit labour costs (ULCs) are starting to cause a headache to Lithuanian producers. Limiting ULC growth and maintaining the competitiveness of Lithuanian exports require actions from both sides – the manufacturers and the government.



PDF The Lithuanian Economy - August 2016


For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt

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