While the IMF is projecting a double-digit economic decline for a large number of countries in Europe this year, it predicts the best outcome for Serbia and Lithuania.
The Governor of the National Bank of Serbia, Jorgovanka Tabakovic, also pointed this out after the conference organized by the Director General of the IMF, Kristalina Georgieva.
And what is it that in this case “connected” Serbia with Lithuania and why their economies are so similar that they are going through the current crisis almost identically. In short, the conclusion is that the focus of both countries is on investments (that both have a long-term investment plan), but the attitude that strengthening the consumption of citizens can only bring good to the country’s economy, writes Blic.
Lithuania is a former member of the Soviet Union. At the beginning of the crisis, the Lithuanian economy was in a healthy state, as banking analysts noted. Lithuania has shown exceptional resilience to the slowdown in the global economy as early as 2019: Lithuania’s GDP grew by 3.9 percent, compared to a growth of only 1.5 percent in the European Union. In addition, Lithuania was one of the three EU countries with faster GDP growth in 2019 than in 2018.
Until the pandemic, and for the third year in a row, the economy of this Baltic state grew faster than expected – GDP growth averaged 3.9 percent.
And it was the same with Serbia. Before the corona crisis, the Serbian economy was on stable feet, investments were at record levels, the country’s public debt was at the level of about 50 percent of GDP, salaries in the public sector grew up to 15 percent a year …
Analysts of the banking sector estimated that the growth and resilience of Lithuania was due to constant systemic changes in the structure of the Lithuanian economy.
A bank report called the factor a “Germanization” of the Lithuanian economy, meaning a positive government budget and external balance sheets, sustainable and balanced growth, driven by household consumption, exports and investment in a similar way to Germany.
Lithuanians predict that due to structural changes in the economy, Lithuania is on the path of faster economic growth and that with the end of the corona crisis, growth could accelerate next year to 4.6 percent with projected GDP growth rates for the next period. 2022-2023. in the range of 3-4 percent.
Investments come first
Two significant large-scale state intervention projects remain in Lithuania, which analysts say could boost further growth and boost consumption and trade.
First, it is a strategic investment plan for economic reconstruction, which the Ministry of Finance announced in early June, and its implementation should begin at the end of the year. The second is the main project of the regional transport infrastructure Rail Baltic (integration of the Baltic states into the European railway network via a standard 870-kilometer railway line).
The organizers of the project claim that the gradual absorption of direct capital investments in the project would provide a significant incentive to local construction and related activities. It is argued that this infrastructure project would increase aggregate demand in the economy and generate GDP growth, thus helping not only to mitigate the negative impacts of COVID-19 on the economy, but also to bring it to rapid growth.
And there are great similarities with Serbia. Our investment plan goes until 2025, and the goal is for the average salary to be 900 euros by then, and the average pension to be 440 euros. The plan is worth a total of 14 billion euros, and the focus is on spending and large infrastructure investments.
The first to leave the Soviet Union
As the first country to leave the Soviet Union, Lithuania is today a member of the European Union, NATO and the Council of Europe. She has been a full member of the Schengen Agreement since December 21, 2007, just when, as the media reported, her “economic rise” began.
The level of unemployment decreased by about five estimates by 2018, while the average salary increased from 357 to 932 euros.
During the talks on the country’s accession to the EU, the most talked about was market liberalization, removal of unnecessary government regulations, market opening and creation of competition. When it became a member of the EU, not only were opportunities created for access to a new market, increased imports and exports, free movement of people, but they also received large funds that contributed to economic development and prosperity.
At that time, the status of Lithuania among foreign investors also improved, B92 reports.
