Companies in Lithuania cut investment due to geopolitical fears

The pre-crisis investments in Lithuania accounted for 25 percent of the GDP, but in 2009 they fell to 17.2 percent and saw a slight increase only in 2013, yet remained below those in Latvia and Estonia.

The first quarter of 2014 exhibited signs of breakthrough as investment in tangible fixed assets grew by almost a third. However, the upsurge did not last long. The growth of investment in tangible fixed assets in the second quarter slowed down significantly and in the third quarter accounted for only 1.3 percent. Sluggish investment was probably the main reason of the slowdown in the country’s economic growth.

The explanation for negative investment trends is obvious. Businesses are sensitive to geopolitical tensions in the region affected by the Russian-Ukrainian conflict. Another evident factor in negative trends was Russia’s food embargo and worsened economic growth forecasts in the main trading partners – the euro-zone countries and Russia.

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