Although this is just the first estimate, it still reveals how Lithuanian economy might end the year, says Advisor to the SEB Bank President Gitanas Nauseda.
According to Nauseda, it has been mentioned on numerous occasions that the domestic market is the life buoy keeping GDP growth afloat. Consumption is stimulated not only by the rising average wage and the falling unemployment level, but also by households' optimism, which has not been diminished by geopolitical bogeymen or by what people regard inflation hike after the euro adoption.
Nauseda says that savings intensity is reflected by deposit growth, and it has slowed down. First of all, it is difficult to expect further deposit volume growth because the comparative base prior to the euro adoption was boosted. Second, low interest rate for fixed-term deposits does not motivate people to save. In addition, it may be stated that the phenomenon of saving for a "rainy day" has waned in Lithuania. This is proved by the fact that sales turnover of non-basic commodities grew faster than sales turnover of food products.
The situation in the real estate market partially reflects consumption optimism. As the demand for housing recovered in early 2014, real estate developers and construction companies responded to this seriously and started building housing and expanding its supply. The construction sector benefited this year from the Bank of Lithuania initiative to tighten Responsible Lending Regulations from 1 November 2015. Real estate buyers who had been undecided previously started borrowing before access to loans was not limited by additional requirements.
Looking forward, housing surplus is not going to disappear at once, this will require some time. If not in 2016-2017, then in 2018 the isse of reducing tax exempt immovable property threshold may be considered once again. It is too risky to rely only on the construction sector to stimulate the economy as its stopping would result in nearly twofold decline of GDP growth rate.
"Export industry has to be taken into account first of all when seeking for faster economic growth development sources. At the end of the year low statistical base effect will become more evident. Export indicators will be compared with the corresponding period of the previous year, when the Russian sanctions were already in effect and its economy started going downward. Moreover, our food industry has essentially reoriented to alternative markets and stabilised production volumes. Of course, the same cannot be said about financial indicators of companies because goods are exported to lower yield markets. In the second half, greater input of the agricultural sector in GDP is expected. This year grain harvest was remarkable, while other crop production indicators have not disappointed either," said Nauseda.
