• Analysis and Studies
• Lithuania: a look at the market

Lithuania is a country located in the northeast of the European continent and, along with Latvia and Estonia, it is one of the three Baltic countries. The country shares borders with Belarus, Latvia, Poland, and Russia by land and Sweden by sea. The country has a long history: in the 14th century, Lithuania was Europe's biggest state. In 1569, Lithuania and Poland legally merged into a single dual state, the Polish-Lithuanian Commonwealth. The commonwealth lasted until 1795 when the state was partitioned by neighboring countries. Lithuania gained freedom in 1918, but it didn't last long. In 1940, the Soviet Union invaded the country, and its dominium lasted until 1991 when it gained independence again. 

During the 90s, Lithuania prepared its economy to join the European Union. In the spring of 2004, the country finally joined the European Union and NATO. In 2015, it also adopted the Euro as a currency. It has a thriving and modern economy and a population of 2.6 million people.

THE ECONOMY OF LITHUANIA

In 1991, the country started the process of privatization of its economy. As in every former communist country, the transition to a market economy caused various issues, like high rates of inflation and unemployment. Thanks to good policies, by 1995 inflation had been reduced, and the country’s trade balance was positive for the first time since independence. In recent years, Lithuania's political economy has been based on improving the business environment, especially by liberalizing labor laws and improving competitiveness and export growth. An issue for the country is the steady outflow of young and highly educated people, which is causing a shortage of skilled labor. This, combined with a rapidly aging population, could stress public finances and constrain long-term growth.

The most important sectors of the Lithuanian economy in 2020 were wholesale and retail trade (29.9 percent), transportation and hotel and restaurant services (20.5 percent), industry (20.5 percent), and public administration, defense, education, health, and social welfare (16.1 percent). Its economy grew by 5.0% in 2021, with a total of 65 billion dollars. It is expected to expand by 1.9% in 2022, less than what expect due to the geopolitical situation. Indeed, the reduction in export to Russia and Belarus and inflation are some of the biggest issues for the Lithuanian economy. According to the Social Progress Index 2021 (published every year by the Social Progress Imperative, a no-profit organization that ranks countries according to social aspects such as access to basic human needs, general well-being, and opportunities), Lithuania is the 27th country in the world for living standards.

LITHUANIA IN INTERNATIONAL TRADE: IMPORT AND EXPORT

Lithuania's exports are directed 56% within the EU, while outside the EU they are directed to Russia, the United States, and the United Kingdom. In terms of imports, 71% come from EU member states, with the remainder coming from Russia and China.

In 2020, the top exports were refined petroleum ($1.85 billion), furniture ($1.61 billion), wheat ($1.3 billion), rolled tobacco ($1.06 billion), and laboratory reagents ($1.05 billion), exported mostly to Russia ($4.09 billion), Latvia ($2.95 billion), Germany ($2.58 billion), Poland ($2 billion), and the Netherlands ($1.79 billion). Crude petroleum ($1.6 billion), cars ($1.17 billion), packaged medicines ($1.01 billion), broadcasting equipment ($663 million), and refined petroleum ($485) million were the top imports, with the majority coming from Poland ($3.98 billion), Germany ($3.96 billion), Latvia ($2.47 billion), Russia ($2.4 billion), and the Netherlands ($1.75 billion).

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