Innovation Agency Lithuania published a review of Lithuania’s export developments in the first half of 2022 and in September, it revised its export forecasts for 2022–2023.
Romualda Stragienė, Director of Innovation Agency Lithuania: ‘At the beginning of the year, when the war in Ukraine broke out and the three export markets – Ukraine, Russia and Belarus – were closed, we feared that Lithuania’s exports would suffer, but this was not the case. Some Lithuanian exporters have successfully redirected their international trade to other markets, while others have even found new opportunities to export more. The energy crisis is pushing up production costs, which is preventing us from earning more. However, this is the situation all over the world, and here Lithuanian producers are maintaining their competitiveness, at least for the time being, by being reliable suppliers of quality products’.
Analysts at Innovation Agency Lithuania point out in this year’s overview of Lithuania’s export development that rapidly rising prices of energy, other raw materials, goods and services are increasing inflationary pressures. This is reducing households’ purchasing power and prompting central banks to accelerate their decisions on anti-inflationary monetary policy measures. In addition, the slowdown in economic growth in the US and China’s tight Covid-19 management policies are having a negative impact on global economic development.
Jonė Kalendienė, Head of Research and Analysis Division of Innovation Agency Lithuania: ‘The large-scale war in Ukraine caused by Russia has increased geopolitical uncertainty in Europe, prompted a sanctions response by Europe and the rest of the world against the invading Russian and Belarusian regimes. It has disrupted supply chains and led to soaring resource prices. The ongoing invasion is directly and indirectly affecting the economic development of EU countries, including Lithuania, and the economic consequences of the invasion are generally characterised by an environment of higher inflation and lower economic growth’.
More expensive exports
According to Kalendienė, several factors are relevant: the weaker-than-previously-expected economic growth outlook for the EU countries, Lithuania’s strong trade and financial ties with Ukraine and the gradually weakening political and trade relations with Russia and Belarus. These have had a direct impact on Lithuania’s export performance, while the unprecedented rise in energy prices has a direct and significant impact on the costs of Lithuanian exporters.
Analysts at Innovation Agency Lithuania estimate that in the first half of 2022, the value of Lithuanian exports of goods of Lithuanian origin (excluding energy products) increased by 23.7%, but all the increase in value was due to price changes. Export volumes even decreased slightly compared to the corresponding period in 2021. The value of re-exports (excluding energy products) increased by 9.2%. In re-exports, the impact of prices on value growth was also very significant, but re-export volumes also increased. The value of services exports grew by 23.0% in the first quarter of 2022, also mainly due to significant price changes.
As previously reported by Innovation Agency Lithuania, Lithuanian exports overcame the challenges of the first half of the year with growth. In terms of markets, goods of Lithuanian origin were exported to Germany (9.9%), Poland (9.2%), the USA (7.9%), Latvia (7.6%) and Sweden (6.3%). Together, these markets accounted for 40.8% of the value of exports of goods of Lithuanian origin. As a result of the war, exports of goods of Lithuanian origin to Ukraine fell by 48.1% in the first half of 2022, when Ukraine was 17th (8th in 2021) in the list of top export markets.
Next year, exports will increase
Compared to the March 2022 forecast, the growth of export values of goods of Lithuanian origin will be 22.9% this year, compared to the forecast of 14.6%. Services will be 14.2%, compared to the forecast of a drop to 3.8%. In 2023, the growth of exports of goods of Lithuanian origin will be 7.7% and services, 7.4%.
Kalendienė: ‘In the second half of 2022, export values in all export groups are expected to grow slightly more slowly compared to the first half of the year. We forecast that export values will continue to grow in 2022 due to price changes, while in 2023 we expect more moderate prices and slightly faster volume growth. Therefore, production will still be more expensive next year, but exports will be higher than this year’.
The latest Innovation Agency Lithuania’s export forecast overview indicates that the value of exports of Lithuanian goods (excluding energy products) will grow by 22.9% in 2022 (to EUR 22.8 billion) and by 7.7% in 2023 (to EUR 24.5 billion) per year.
The value of re-exports (excluding energy products) is projected to increase by 8.9% (to EUR 13.6 billion) in 2022 and by 7.4% (to EUR 14.6 billion) in 2023 year-on-year. In 2022, about half of the value growth will be driven by price changes and the other half by volume growth, while in 2023 re-export volumes will grow much faster than prices. Meanwhile, the value of services exports will increase by 14.2% (to EUR 14.7 billion) in 2022 and by 7.2% (to EUR 15.7 billion) in 2023 year-on-year. In 2022, about three-quarters of the value growth will be driven by price changes and one-quarter by volume growth.
