Analytics, Baltic States – CIS, Economics, Financial Services, Lithuania, Markets and Companies, Transport

The economists agreed that Russia's embargo of Lithuanian products will continue to have a negative effect on economic growth in 2015, however the general decline of Russia's economy will pose a much greater risk, they said.

According to the prime minister, negative effects are attempted to be facilitated by looking for new export markets for goods of Lithuanian origin, the Government and businesspeople are actively engaged in this.

It was emphasised that Russian sanctions damaged Lithuanian service sector less than expected, but the real situation will only be known after 2014 service export data is announced. The economists estimate that in 2015 Russia will have a greater impact on the transport sector due to both sanctions and depreciating rouble.

Negative effects will be noticed in the tourism sector as well – both directly on accommodation services and on reduced retail trade. The prime minister believes that Lithuania must boost the flows of inbound tourists not only from the neighbouring countries but also such countries like Israel, Georgia, Azerbaijan or Oman.

At the meeting the economists also said to have noticed a new tendency – increased money saving. Based on surveys, people think that in 2015 they will manage to save more. Therefore, based on the assessment of economists, the savings rate should increase in 2015. This may be related to the introduction of the euro (in late 2014 people were buying more long-term consumption goods and now are delaying purchases) and uncertainty as regards Russia.

Analysts say that domestic consumption will be the driving force of economy in 2015. Although slower than projected previously, yet wages are forecast to grow by 4-4.5 percent. Competition in search of employees will also affect wage growth.

The 2015 budget does not need to be revised, in spite of the risks. Structural unemployment problems are proposed to be solved by devoting more attention to the retraining of staff. According to the prime minister, the new version of the Labour Code should help solve this problem.