Lithuanian businesses are decreasing savings and increasing investment as profits almost hit pre-crisis highs, with growing salaries and domestic consumption, and positive trends in Lithuania’s main export markets.
Bank of Lithuania data shows that the ratio of corporate savings (accumulated cash and deposits) to gross domestic product (GDP) last year amounted to 14.8%. In 2015 the ratio was 16%, and in 2014 this figure was 15.5%,
Last year business investment grew by more than 10%. Moreover, for the first time since the crisis in 2008-2009, the overall level of corporate loans increased as well.
There are a few key factors behind this increased business optimism. First of all, growing domestic demand in Lithuania. Secondly, record company pre-tax profits totalling €4.2 billion, or as much as 40% more than in 2014.
Thirdly, rising wages are not only boosting domestic demand but also increasing costs for businesses which forces them to think about investing in technology or approaches that bring higher productivity.