Despite the global shortage of raw materials, rising commodity prices, the EU’s continued imposition of sectoral sanctions on Belarus, and tense political and economic relations between Lithuania and China, the value of exports of goods manufactured in Lithuania continues to grow rapidly. This is mainly due to the strong economic activity of Lithuania’s main export partners in the EU and the US, according to a press release from Versli Lietuva.
Lithuania’s export growth potential is not diminished by the fact that international institutions have recently downgraded the economic outlook for some of Lithuania’s major trading partners. As a result, export growth is expected to be in double digits in 2021.
“This rapid, year-round export growth suggests that the shortage of workers and production capacity is becoming an increasingly important issue for manufacturing companies. Therefore, the currently observed tensions over wage and price growth may only become more acute,” says Jonė Kalendienė, Head of Research and Analysis at Versli Lietuva.
In the first three quarters of 2021, the value of exports of goods produced in Lithuania increased by 23.9% compared to the same period in 2020. Excluding energy goods (petroleum products), whose prices have recently risen, exports of Lithuanian goods grew by 21%.
From the beginning of 2021 onwards, the most significant positive impact on the growth of exports of goods of Lithuanian origin has been made by exports of chemical products. The increase in exports of these products in the three quarters of 2021 accounted for almost one-third of the total growth in exports of Lithuanian origin (8.1% p.p. out of 21%). In addition, other critical Lithuanian exporting sectors – engineering (4.6% p.p.), furniture (2.8% p.p.), wood and paper (2.5% p.p.), agriculture (0.4% p.p.), and food and beverages (0.7% p.p.) – also contributed positively.
Germany, the USA, Poland, the Netherlands and Sweden remained the most important foreign markets for Lithuanian exports. The value of exports of Lithuanian origin to Belarus decreased by 1.9%, to China by 29.9% and to Taiwan by 6.9% in the three quarters of 2021. For example, the negative change in exports to China slowed down the growth of Lithuanian exports by only 0.5% p.p., while the impact of Belarus and Taiwan on the indicators was negligible. It should also be stressed that last year a large part of exports to China was cereals. In contrast, this year, they are not exported, so the decline in exports to China this quarter does not reflect the situation of other Lithuanian companies on this market. In addition, exports of other goods to China have increased by around a tenth over the three quarters of 2021.
Re-exports have shown a more moderate change this year, growing by 10.8% y-o-y, excluding petroleum products by 9.9% y-o-y. In the structure of re-exports, Russia, Latvia, Estonia, Belarus and Poland are the most important partners of Lithuania. The sectoral sanctions imposed on Belarus since the summer have so far not had a significant negative impact on Lithuania’s re-exports to Belarus, with an 8% year-on-year decline and a 0.7% impact on the overall re-export result.
“However, the continuing and intensifying unrest along the border and the possible tightening of EU sanctions or the extension of the sanctions package against Belarus may have a greater impact on Lithuania’s re-export growth in future. Therefore, we would only see changes in the bilateral trade statistics between Lithuania and Belarus in 2022. In general, re-exports are much less important for Lithuania’s economic growth than the change in Lithuanian exports, as it is most traders and the transport sector, not the manufacturing sector, that make money from re-exporting in Lithuania,” says J. Kalendienė.
The value of Lithuania’s total merchandise exports in the first three quarters of 2021 grew by 18.6% compared to the same period in 2020, excluding petroleum products – by 16.3%.
“Analysts at Versli Lietuva forecast that the annual value of Lithuanian exports of goods (excluding energy products) is expected to grow by 17% in 2021, re-exports of goods (excluding energy products) by up to 12.7%, and services by up to 8.9%. Next year, with the expectation of sustaining the same rapid growth rate of the EU economies, the growth of exports of goods of Lithuanian origin is projected to be 14.6%, of re-exports by 12%, and of services exports by 8.5%.