Pumping investment into regions may worsen decline, says economist

Pumping EU money into Lithuania’s regions to try and reverse their declining fortunes may be creating a false economy and will not lead to a longer term solution to demographic decline and declining investment and demand in the regions.

“The big question is whether the government should come to terms with this trend or try to change it? So far, it is not going well since emigration is among the highest in Europe. Therefore, regions, from the pessimistic point of view, may be doomed to be a place for old people to live. This demographic situation and age structure of the regions does not promise anything good for the future,” said economist Raimondas Kuodis.

“Everyone thinks that it is enough to invest and productivity, salaries will increase – but we must remember that scissors cut with both blades. We need to know who will buy a manufactured product so that we can realize our vision, otherwise it will be no more than an illusion of a profit,” said Kuodis.

He said the regions should no longer get as much investment as they did using EU funding: “Forcing money into them can worsen the situation, it only forces them deeper into a closed circle.”

He said regional infrastructure was declining, communities are aging, which then leads to demand diminishing along with the investment in the regions.

This is how regions get trapped in a vicious circle and businesses can no longer be lured even with cheap labour force, said Kuodis.

15min.lt