2020.03.18 09:25

Lithuania extends 90-percent subsidies to keep jobs during coronavirus downtime

BNS2020.03.18 09:25

The Lithuanian parliament, Seimas, has approved key economic measures to help businesses and workers to mitigate negative consequences of the coronavirus crisis.

MPs decided on Tuesday to offer subsidies to employers to preserve jobs during the coronavirus quarantine downtime. The government will shoulder 60 to 90 percent of the payroll of affected businesses.

Read more: Lithuanian economy could contract up to 2.8 percent, finance minister warns

Businesses that did not have to stop their activities due to quarantine, but were affected in other ways, can expect a subsidy of 60 percent of their employees' salaries, with the companies having to muster the rest. The subsidy would require around 300 million euros from the state budget.

The second subsidy would be available to businesses that had to completely stop their activities and would cover 90 percent of the payroll. How much this would cost the government has yet to be calculated.

In both cases, subsidies would not exceed the minimum monthly salary in Lithuania, which now stands at 607 euros. Employers would be required to cover 10 or 40 percent in additional to that amount.

Sickness leave for parents

Parents staying home to look after children during the quarantine period will be eligible for full sick leave benefits, under the amendments adopted by the Seimas of Lithuania on Tuesday.

All 100 MPs who attended the vote supported the changes to the existing sickness benefit payment rules after the government declared a state-level emergency and placed the country under quarantine. All schools, nurseries and kindergartens have been closed.

The amendments drafted by the Ministries of Social Security and Labour will come into force once President Gitanas Nauseda signs them.

Up until now, parents could receive sickness benefits for children only for two weeks if an educational establishment was placed under quarantine.

Simpler public procurement rules

Certain public procurement procedures will be simplified during the emergency situation declared over the coronavirus after the Seimas of Lithuania made necessary changes to the Law on Public Procurement with 109 votes in favour.

“It will be possible to make purchases more quickly and easily,” Energy Minister and acting Economy and Innovation Minister Žygimantas Vaičiūnas told lawmakers when introducing the amendments.

Read more: Lithuanians losing income over coronavirus offered ‘loan breaks’

Double-digit dip in April

Lithuania will not escape recession this year, despite the economic stimulus measures deployed by the government and central bank, economists from SEB bank believe.

They estimate that Lithuania's economy will shrink 3.2 percent this year, even with the government's planned measures to stimulate the economy.

As the situation is constantly deteriorating, the Lithuanian government's economic stimulus package will have to be expanded, the SEB statement reads.

“The economy is likely to face the sharpest double-digit dip in April when Lithuania's industry (for example, IKEA after closing its stores in Europe) will feel a bigger blow due to stalled orders from Europe, and also other sectors which have not felt a major impact from the quarantine yet,” SEB economist Tadas Povilauskas said in a statement.

“Under the optimistic scenario, if the quarantine in Europe is shorter than we expect and economic stimulus packages across the world help the economy to recover faster, then Lithuania's GDP could shrink 1.6 percent. Under the pessimistic scenario, Lithuania's GDP might fall as much as 6 percent,” the SEB economist said.

Even these forecasts will need to be updated as the situation changes daily, he added.

Upswing after recession

Meanwhile Luminor bank economists say Lithuania's economy may shrink around 2.5 percent this year, but grow 6.5 percent next year.

“A recession is practically unavoidable, but if we assume that the virus is brought under control by June, then 2021 should be a rather impressive year,” Žygimantas Mauricas, chief economist at Luminor, told a media conference on Wednesday.

“Viruses come and go. People are able to contain their spread or invent vaccines. There's a good chance that the virus will stay for a couple of quarters and we will see a different situation in June already,” Mauricas said.

“We based our forecasts on the assumption that the virus epidemic is contained by June. It’s neither an optimistic nor a pessimistic forecast,” he added.