Economy, war and euro: why are Lithuanians so pessimistic?

Meanwhile sociologist Vladas Gaidys tells lrt.lt that other factors erode optimism more than the approaching euro switch-over. “It would be strange if Lithuanians thought things would get better when what everyone’s actually talking about is preparations for war,” he notes.

Moods about the economy have grown noticeably more pessimistic over the last year, public opinion polls suggest. Those who think the Lithuanian economy is doing well and will be doing even better have halved in numbers from a year before and currently make up under one tenth of the population. Meanwhile sceptics are approaching 50 percent.

Opinion pollster “Baltijos Tyrimai” conducted a survey on 10-17 September which shows that the share of those who think the Lithuanian economy is in a precarious situation has grown 20 percentage points year-on-year. In September 2013, it was 24 percent, while this year, 44.

The ranks of optimists, by contrast, are noticeably thinning. In September last year, 17 percent of the polled said they felt the effects of economic growth, while this autumn those who say so have almost halved, to 9 percent.

Two pieces of news: good and disconcerting

Economist Žygimantas Mauricas of Nordea bank points to two factors explaining the drastic change.

“The Russian-EU economic war will hurt Lithuania a great deal and this is reflected in the public sentiment. Another factor are the largely groundless fears about sharp price rises following the euro adoption. Exactly the same happened in Latvia and Estonia, many peopled were fearful but there was no price rise,” Mauricas tells lrt.lt.

He says he has two pieces of news to share, one good and one potentially disconcerting. “The good news is that, very likely, this factor [euro-related fears] will ease greatly, if not altogether disappear, next year. Fears about a sharp rise in prices are unlikely to be confirmed, if the examples of Latvia and Estonia are any indication. Moreover, provided that the EU-Russia relations normalize, it will also lose importance as a factor.

“On the other hand, there are hazards, too. If people remain fearful for extended periods of time, it can negatively influence domestic consumption and tax collection. In that case, the fears get confirmed by deteriorating indices and short-term fright can grow into long-term apathy,” Mauricas says.

He adds that the government should take the pessimistic scenario into account when planning next year’s budget.

“My advice is to be cautious in estimating economic outlook and prepare a plan B. To adopt a budget flexible enough to be able to cut spending if need be, or, alternatively, be less optimistic and, if revenue exceeds the plan, decide later what to do with the surplus,” according to Mauricas.

Nothing to do with the euro?

Meanwhile sociologist Vladas Gaidys begs to differ. He quotes Eurostat data which show consistent decline of consumer confidence.

“In autumn last year, Lithuania ranked pretty well among the EU countries in terms of optimism. The breaking point was December-February, during the hight of the Maidan clashes in Kiev. Since then, indicators have been on a sharp decline. it has nothing to do with the euro adoption,” says Gaidys, director of another pollster, “Vilmorus”.

He adds that, even though there are still quite many euro sceptics, Eurobarometer and other polls signal a shift to the positive side.

“I have not and do not perceive any scorn over the euro. There’s simply the opinion that perhaps we should not rush so much, there are countries without the euro, that we should make the switch once our salaries are bigger. But there’s no ideological argument that Lithuania is losing a piece of its sovereignty over this. If that argument were accepted, there’d be no convincing to the contrary,” the sociologist summarizes.

Gaidys says one should not expect Lithuanians to believe that things would be better in the current environment, when they are bombarded with messages about a possibility of a war with Russia. “If they believed [that things were getting only better], it would seem rather schizophrenic in the current context,” he believes.

“What kind of processes does a person perceive every day after switching on TV news or browsing online newspapers? Meat and dairy exports are interrupted, transportation industry is suffering. Lithuanians in general are very sensitive when someone mentions “production”. I think these things put them on alert,” Gaidys speculates.

Anxiety about the economy is not helped by the African swine fever outbreak, the sociologist says, nor by the financial troubles experienced by Orlen Lietuva, the oil refinery in northern Lithuania that is one of the major tax payers in the country.

“The need to slaughter pigs because of the fever sounds somewhat surreal to many a Lithuanian. Sixty percent of Lithuanians were born in rural areas – when they hear that people will have to shoot their pigs, it doesn’t sound good economically,” Gaidys believes.

Heating bills might undermine government’s popularity

Even though the Lithuanian public exhibits growing pessimism about the economy, this does not translate into declining popularity ratings for Prime Minister Algirdas Butkevičius. According to another “Baltijos Tyrimai” poll, conducted between 10 and 17 September, 57 percent regard Butkevičius favourably.

Political scientist Bernaras Ivanovas says economic pessimism might not negatively affect the ruling coalition. Moreover, the next general elections are still years away.

“The span that people in rural areas and elsewhere remember [the reasons behind their pessimism] is, at best, eight months before the elections. Today, the governing parties are quite confident, they are more preoccupied by inter-coalition power play than moods among the country folk,” Ivanovas tells lrt.lt.

Gaidys adds that PM Butkevičius might lose some popularity points when the heating season starts. The government is currently discussing whether or not scrap VAT exemptions on central heating.