Our comprehensive assessment of Lithuania's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Lithuania, as well as the latest industry developments that could impact Lithuania's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Lithuania before your competitors.
Lithuania Country Risk
While Lithuania will experience subdued economic growth in 2015 on the back of geopolitical headwinds, the outlook for 2016 is brighter. Improving external demand and Lithuania's first Liquefied Natural Gas terminal will boost exports and fixed investment from 2016 onwards.
Public support for Lithuania's centre-left ruling coalition will remain high, as the government maintains the same policy course in 2015-2016 that bolstered its public approval ratings in 2014 - its hardline stance towards Russia and ramped-up fiscal spending. This will solidify their term in power and will boost their chances of winning general elections in October 2016.
The Lithuanian government's goal of achieving balanced budget by 2017 remains out of reach, as the fallout from the Ukraine crisis will suppress public revenue growth and keep expenditures...
Lithuania Industry Coverage (9)
2014 has proved a very positive year for new passenger sales within Lithuania. Over the first nine months of the year, passenger car (PC) sales were up by 24.5% year-on-year (y-o-y), at 11,071 units, according to figures from the European Auto Manufacturers Association (ACEA).
However, on the commercial vehicle side, the sales performance has been less encouraging. 8M14 figures from ACEA show a total of 1,328 light commercial vehicles (LCVs) sold in country, with a further 1,431 medium and heavy commercial vehicles sold, plus a further 164 buses, for a total of 2,923 units sold year-to-date, down 8.2% y-o-y.
Adding the 2,923 CV units to the 9,795 PCs sold over 8M14 makes for a total new vehicle market of 12,718 units. On current sales trends, this leaves the Lithuanian new vehicle sales market on target to hit BMI's forecast of 19,128 units for the full year.
Food & Drink
Lithuania Food & Drink
While a breakdown of the Q314 GDP figure is not available at the time of writing, we believe domestic demand has also suffered due to the significance of the external sector for Lithuania's small, open economy. Lending support to our view has been a series of high-frequency economic indicators. Industrial production contracted by 0.5% y-o-y in September on a workday-adjusted basis. While pointing to growing pressure on private consumption, the modest abatement in retail trade growth is also reflective of the resilience of the household sector, which has been bolstered by falling unemployment and rising wages.
Headline Industry Data (local currency)
Per capita food consumption growth in 2014: +2.9%; compound annual growth rate (CAGR) to 2018: +3.7%
Alcoholic drinks sales value growth in 2014: +2.0%; CAGR to 2018: +4.6%
Lithuania Freight Transport
The escalating trade war between Russia and the EU prompted us to revise down our forecast for growth in Lithuania for 2014. Growth will accelerate in 2015, as geopolitical tensions in the region disperse, trade restrictions get lifted, and overall external demand improves. However, with the situation in the region far from certain, Lithuania's freight industry may well bear the brunt of any further tensions should exports drop as a result.
Our expectation for a slowdown in Lithuanian economic growth appears to be materialising. The main factor behind this trend is softer external demand on the back of the Ukraine crisis (see 'Growth Outlook Sours' May 20 2014). However, escalating trade wars between Russia and the EU exacerbated the slowdown, prompting us to revise down our 2014 growth forecast - to 2.6% from 2.9% previously.
According to the Bank...
BMI View: The deteriorating relations between Russia and the EU are proving to have a detrimental effect on Lithuanian economic momentum - weak demand from Russia and elsewhere, and poor investment confidence. However, the economy is forecast to strengthen beyond 2015 as the external situation improves, and while the infrastructure will ultimately stagnate over the next decade, there are still opportunities in construction, and EU-funded transport and energy developments.
In the long term, despite a slowing and moderated growth picture, we do not expect any major fluctuations, and while steadiness may not spell a market with abundant opportunity, investors can be assured of Lithuania's position as an attractive investment destination, owing to its EU membership. Lithuania's fiscal deficit converging...
BMI View: Lithuania's insurance sector has many strengths. However, the outlook, both over one and five years, is fairly uninspiring. As of late 2014, we see the strong sales in new business reported by some life insurers as being a one-off factor associated with Lithuania's adoption of the euro (and, therefore, 0% interest rates on bank deposits). The life insurance segment remains very under-developed by most metrics. Accordingly, we think that the main challenge - the low levels of income of most households - persists. This means that we still look for (low) single digit growth in life premiums through the forecast period. In the non-life segment (which is also under-developed) the main challenge is different, but should also result in sluggish premium growth. In spite of...
Lithuania Medical Devices
BMI Industry View: Lithuania's medical device market is returning to growth, having suffered in line with the global economic crisis in 2009 and 2010. The past three years have seen strong growth, and in 2013, the Lithuanian medical device market was valued at an estimated US$257.4mn, or US85 per capita.
Headline Industry Forecasts
In 2013, the Lithuanian medical device market was valued at an estimated US$257.4mn, or US$85 per capita. After experiencing a contraction in 2009 in line with the global financial crisis, it returned to growth over the 2011-2013 period. By 2018, BMI forecasts the market will be valued at US$...
Pharmaceuticals & Healthcare
Lithuania Pharmaceuticals & Healthcare
BMI View: Russia's economic woes will present palpable risk to the economy of Lithuania, with negative effects on fiscal planning. We expect this to weigh on the growth of the pharmaceutical market and healthcare expenditure in the country over the course of 2015.
Headline Expenditure Projections
Pharmaceuticals: LTL1.74bn (USD667mn) in 2013 to LTL1.80bn (USD699mn) in 2014; +3.2% in local currency terms and +4.8% in US dollar terms.
Healthcare: LTL7.68bn (USD2.94bn) in 2013 to LTL7.97bn (USD3.09bn) in 2014; +3.7% in local currency terms and +5.3% in US dollar terms.
Lithuania remains in the lower tiers of the...
BMI View: Lithuania's mobile market recorded negative growth in 2013 and the for first nine months of 2014, with incumbent Omnitel finally ceding its lead position to Tele2. The mobile market is saturated and as operators move customers to more valuable postpaid plans, so large numbers of inactive prepaid accounts are being eliminated. In Omnitel's case, this has yielded stronger ARPU figures and uncovered underlying positive ARPU growth that had previously not been visible. Consumers have become used to very low monthly mobil...
BMI View: Overall we maintain our outlooks for the Baltic states' tourism sectors over 2015. Although the countries stand to lose out due to the ongoing issues (both economic and political) arising from the Russia-Ukraine tensions, and this will constrain arrivals from these countries, we believe that these losses will largely be mitigated by increased inter-regional tourism within the three Baltic states, as well as from other European countries which increasingly view the Baltic region as a more stable alternative to Russia and Ukraine. In particular we feel that Lithuania's tourism sector could see substantial growth over the longer term if its bid to join the euro is successful, as it will facilitate multilateral tourist traffic from and to the eurozone.
One of the main developments over 2014 has been the advancement of the proposal to...