Analytics, Baltic Export, Economics, Lithuania, Markets and Companies

Meanwhile the share of the service sector increased from 65 to 73%. Therefore as the standard of living was improving, the structure of Lithuania's economy was shifting towards that of advanced countries.

Senior analyst at SEB Bank, Vilija Tauraite, says that it is difficult to see in the statistics the contribution of foreign companies' service centres to the rising importance of the whole service sector. In the last decade the share of trade, transport, accommodation and restaurant services grew the most. However the significance on the country's economy of information and communications sector diminished. Service centres by themselves do not mean that the flow of direct foreign investment will increase. Unlike manufacturing companies, service centres can get by with minimum investments as they do not acquire neither companies, nor buildings or equipment. The greatest economic advantage of new service centres are the well-paid jobs, on Lithuanian scale, that they create. Not only do they stimulate wider wage and consumption growth but also establish an attractive environment for re-emigration.

Foreign direct investment in Lithuania grew the most prior to 2007, when state property was being privatised, but afterwards the growth subsided. In the last two years total direct foreign investment has not changed. It increased in financial, real-estate operations, administrative services, transport and storage, construction sectors. But in manufacturing and energy industry direct foreign investment decreased. Therefore it seems that foreign investors are beginning to appreciate Lithuania not for its manual labour but for more complex manufacturing or service areas. They also see the potential for domestic market growth by investing in real estate properties or retail trade.

The analysis of industries allows to make similar conclusions about changes in economy. A typical example is the decline of the role of textiles industry, which is traditionally characterised by low added value. In 1998 textiles and apparel industry accounted for 14.9% of Lithuania's total industrial production, whereas in 2014 it accounted only for 4.9%. The share of food product and drinks industry decreased from 27.6 to 20.1%. Meanwhile the importance of refined petroleum products, chemical, furniture, rubber and plastic, metal and electrical appliance manufacturing industries increased. On the other hand, in the last decade manufacturing of computer, electronic and optical products dropped. Hence lasers and other products worthy of national pride remain as a niche industrial activity.

Tauraite says that industrial companies are manufacturing more for export and not domestic consumption, which is a good sign indicating that Lithuanian products are competitive. In 1998

Lithuanian companies exported 48.3% of their production, whereas in 2011-2014 around 60%.

One sensitive issue which might slow down the growth of standard of living in Lithuania is the lack of investment by companies. In the last quarter of 2014 tangible investments rose by just 0.9%. Thus if investment in manufacture or service development and efficiency improvement remains low, then future economic development might be hindered in short term, the analyst says.