News2020.01.30 13:00

Lithuania's GDP growth beats forecasts, but unemployment on the rise

Jonas Deveikis, 2020.01.30 13:00

Lithuania's GDP growth last year beat all previous forecasts, recent data shows. This makes growing unemployment all the more puzzling, economists say.

The Lithuanian economy stood at 48.3 billion euros and grew 3.9 percent last year in real terms, according to data from Statistics Lithuania, anchored by healthy performance in the country's industry and service sectors.

“Industrial production grew, there was more transportation of passengers and cargo,” said Jūratė Petrauskienė, the head of Statistics Lithuania, while presenting the calculations on Thursday. “Agriculture climbed out of a hole and created one-fifth more value than the year before. There were fewer economically inactive people.”

The GDP growth figure is adjusted to inflation which stood at 2.7 percent. Prices of goods grew on average 1.8 percent last year, while services appreciated 4.8 percent.

The 3.9-percent GDP growth is much faster than earlier predictions, economist Romas Lazutka of Vilnius University says.

“The European Commission said the economy would grow 2.7 percent, the Ministry of Finance estimated 2.6 percent, SEB bank, 1.9,” he notes.

The accompanying growth in unemployment is paradoxical, Lazutka adds.

According to Statistics Lithuania, there were 1.378 million employed people in the country last year and about 92,000 unemployed, or 6.3 percent. Despite strong economic growth, unemployment increased by 2.3 percent.

Economist Vaidas Navickas notes that growing unemployment contrasts with employers' statements that they are facing labour shortages.

A reason may be a growing number of migrant workers from non-EU countries, most of whom take up low-skilled positions, according to Navickas.

Profits in the construction sector nearly doubled last year, he says, but workers wages did not grow accordingly.

“This prevents our economy from moving to higher added value,” Navickas says.

Throughout the economy, real wages grew 11.6 percent. Average monthly salary last year was 822 euros, after tax (1,296 before tax), or 102 euros more than in 2018.

However, Navickas says, median salary would give a much better idea of people's standards of living than the average.

“Instead of average wage, which was almost 1,300 euros, average person makes 1,007 euros on paper and disposes of 656 euros. That is not a whole lot of income,” he says.

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