Ukraine War’s Influence on Lithuanian Exports in 2022

In 2022, Lithuanian exports of goods did not do as well as usual because of the war in Ukraine.  In 2002, the total value of Lithuanian export goods was rapidly increasing. If compared to the appropriate period in 2021, the total export jumped up by 28.1 per cent., writes Jonė Kalendienė, Head of the Research and Analysis Division, Innovation Agency Lithuania.

The pace of growth of the value of total exports in the second half of the year was similar to that of the first half. However, a slightly bigger impact on the growth in the export value in the second half of 2022, if compared to the first half, was made by the dynamics of export price; the value of reexporting goods experienced faster growth, while the value of export of Lithuanian origin goods – slower.

In January-November 2022, export prices were rising by over 12 per cent (including the first half – 11.6 per cent, second half – 13.4 per cent).  With hostilities still going on in Europe and a lot of political tension in 2023, the effect of prices on the growth of export value should be smaller but still significant. On the other hand, export volumes shouldn’t grow quickly because the EU economy as a whole is growing slowly.

A major impact on the general export growth was made by Lithuanian-origin goods, the export of which in 2022 increased by 26.7 per cent in the course of the year.  In the first half of the year, its value increased by 32.7 per cent, and in the second – by 21.7 per cent. No significant changes took place in the exporting sectors, which mainly contributed to the growth either in the first or second half of the year. The oil industry had the greatest positive impact on the growth of exports of goods of Lithuanian origin in 2022, accounting for slightly less than half of the total value growth (11.5 percent out of 26.7 percent).

Export of other Lithuanian economic sectors—the engineering industry (4.4 per cent), the industry of food, beverages, and tobacco (4.3 per cent), furniture (1.6 per cent), and wood and paper industries (1.5 per cent) – was also growing. It must be noted that the development of the export of chemicals and pharmaceuticals hardly impacted the dynamics of the Lithuanian origin export in 2022 (-0.1 per cent).

By markets, major export destinations were Germany, Poland, Latvia, the USA, and the Netherlands. In the context of the war in Ukraine, the growth of Lithuanian-origin exports in an easterly direction decreased during the year. Exports of Lithuanian-origin goods to Ukraine fell by one-tenth, and Ukraine fell out of the top ten most important export markets: in 2021, it was the eighth most important export market, while in 2022, it was the eleventh most important import market for Lithuanian exports. Exports to sanctioned aggressor countries Russia and Belarus fell by 45.4 percent and 36.5 percent, respectively, during the year (by a total of EUR 213 million).

The value of export to the Central Asian countries – Kazakhstan, Kirgizstan, Tajikistan, Uzbekistan, and Turkmenistan – was rapidly growing. However, the absolute value increase was rather small (EUR 38 million in total) and did not compensate for the decline in value in the Russian and Belarus markets. The value of Lithuanian-origin export to Taiwan was small (EUR 21.7 million), and to China, – slightly bigger (EUR 45.1 million).

In 2022, the reexport of goods experienced a growth of 30.6 per cent during the year. In the first half of the year, its value increased by 20.0 per cent, and in the second – by 39.7 per cent. The natural gas industry had the greatest positive impact on reexport growth, accounting for roughly one-third of total re-export value growth (9.7 percent of 30.6 percent). The group of motor vehicle goods of the engineering industry (6.3 per cent) and other goods (3.4 per cent) also significantly contributed to the reexport growth.

Natural gas reexports targeted the Latvian, Polish, and Estonian markets, this industry atypically accounted for 7.8 per cent in the reexport structure in 2022  (0.2 per cent in 2021). Therefore, the war in Ukraine and its consequences induced significant changes in the goods to reexport structure in 2022. By markets, major reexport markets in 2022 were Latvia, Russia, Poland, Belarus, and Estonia. Goods re-exported in an easterly direction continue to grow, and the trends slightly differ from those of the Lithuanian origin export. In 2022, the value of reexports to aggressor country Russia fell by 25.0 percent while increasing by 52.4 percent to Belarus (a total decrease of EUR 373 million).

Reexport value to Ukraine decreased by approximately one-tenth during the year (EUR 53 million). The total value of reexports to the Central Asian countries—Kazakhstan, Kirgizstan, Tajikistan, Uzbekistan, and Turkmenistan—was rapidly growing, and the growth in the absolute value was rather significant (EUR 953 million in total). It essentially compensated for the decrease in the value of reexports to the Russian market (EUR 845 million).