Economists weigh in on Brexit effects on Lithuanian economy

Economists interviewed by BNS say that, if Britain were to leave the EU, Lithuania would see a decline in its exports to the UK and a decrease in remittances from Lithuanians living in Britain after the end of the withdrawal process, which will take approximately two years. Moreover, new emigrants willing to go to the UK would face problems with moving to the country and finding a job there.

The Lithuanians who already work in the UK hope that the country’s exit from the EU will not change their status in the country and they will be able to continue living and working there.

Nerijus Mačiulis, chief economist with Swedbank Lithuania, believes that in the event the British voters vote ‘leave’, Lithuania’s economy will not feel any major changes during approximately two years.

“In the short-term and mid-term, there won’t be any effect on Lithuania, despite our rather close commercial ties with the United Kingdom, which is one of the top five Lithuanian trade partners. It does not mean anything as the decision to leave the European Union made at the referendum would not have any immediate consequences,” he said.

In his view, the biggest risk is that Brexit might trigger gradual disintegration of the EU, which would entail significant negative economic and political effects for Lithuania.

Meanwhile, Gitanas Nausėda, economist and adviser to SEB Bankas president, says that Brexit would trigger a plunge in the pound, which might have a negative effect on Lithuanian exporters in the short term.

“It won’t be some physical effects, such as discontinuation of cooperation with the United Kingdom. It would be a challenge of economic nature, which, I’d say, would arise due to a potential fall of the pound in the short term… It is a general view that the pound and the euro will weaken against the US dollar in case of Brexit. This will imply problems for everyone who exports to the United Kingdom as export revenue will decrease once converted into euros. Our exports of goods (to the UK) are rather substantial hence there’ll be some effect,” he told BNS.

According to Žygimantas Mauricas, chief economist with Nordea Lithuania, if the UK were to leave the EU, remittances to Lithuania would decrease immediately due to a slump in the pound, which would make Britain less attractive for business.

“Those who are in Britain already won’t face any major changes. However, the currency would get cheaper, which, of course, means a decrease in remittances to our country. Most of the Lithuanians (in the UK) have jobs already and are settled down hence I think that the economic effect (on them) won’t be substantial. However, those who plan to move there will face a set of new circumstances, including cheaper currency, which will make Britain less attractive for business. Also, Britain may not be able to avoid an economic downturn hence it might be difficult to find a job there during six month or even a year,” Mauricas said.

Marius Raugalas, president of the Lithuanian City of London Club and senior planning and commercial manager at Bank of Ireland, told BNS that, in case of Brexit, the UK was likely to introduce stringent requirements for those migrants who wanted to move to Britain now. Yet he believes that it will still be able to come and work, even though the process will be more complicated.

The economists who spoke to BNS believe that Britain should remain in the European Union. Mačiulis guesses that 48% of British voters will vote “Leave”, while Nausėda mentions 40% and Mauricas – between 48% and 52%. Rokas Grajauskas of Danske Bank says that the ‘remain’ camp will probably win with a small margin whereas Raugalas refused to make any guesses as to the results of voting.