‘Moment of truth’ for Lithuanian economy after 2020

Currently, the EU’s support to Lithuania is equal to about €625 per person, but it will go down significantly after 2020.

Between 2004 and 2014, the first decade of Lithuania’s membership in the EU, its GDP doubled and was €35 billion in 2014. During the time, Lithuania received 4.5 times more funds from the EU’s budget than paid into it.

Žygimantas Mauricas, chief economist at Nordea bank, says that GDP growth results during the second quarter of 2016 may be a warning about what to expect after 2020.

“Funds of the last financial period are already used up, while those of the new period are not yet out,” he said. “We can see that investment dropped and GDP growth [in Q2 this year] is only 2%, though it could have been 3%.”

He says that getting over dependence on EU money may be beneficial for Lithuania in the long run: “There should not be a big shock, and there will be some benefit in the long run, because it will force companies and institutions to think about operating more efficiently.”

Mauricas believes that Lithuania does not always make the best use of EU investment.

“First, a lot of funds are used for projects that should be done anyway. Only instead of being funded by government companies, universities or ministries, they get EU money.

“Second, we are implementing projects that, from the economic point of view, should not be implemented. We take them up just because there’s EU money available,” Mauricas says, offering as an example the Rail Baltica railway line running across the Baltic states from Tallinn to Warsaw.

“A lot of money has been invested, but it still takes 8 hours to get to Warsaw [from Vilnius], while Via Baltica [highway] construction work is stalling for some reason,” Mauricas says.