Our comprehensive assessment of Lithuania's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Lithuania, as well as the latest industry developments that could impact Lithuania's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Lithuania before your competitors.
Lithuania Country Risk
The escalating trade war between Russia and the EU has prompted us to revise down our forecast for growth in Lithuania for 2014. Growth will accelerate in 2013, as geopolitical tensions in the region disperse, trade restrictions get lifted, and overall external demand improves.
Lithuania's current account surplus will swing back into deficit in 2014 as the trade war between Russia and the EU will deepen the Baltic state's trade deficit. Going forward, we forecast modest current account deficits, underpinned by persistent trade and income deficits, and mitigated by growing services surplus, while resumption in foreign direct investment flows will ensure the country meets its external financing requirements.
Despite the recent expulsion of a junior coalition partner out of the Lithuanian government, the centre-left cabinet of Prime...
Lithuania Industry Coverage (9)
2014 has proved a very positive year for new passenger sales within Lithuania. Over the first nine months of the year, passenger car (PC) sales were up by 24.5% year-on-year (y-o-y), at 11,071 units, according to figures from the European Auto Manufacturers Association (ACEA).
However, on the commercial vehicle side, the sales performance has been less encouraging. 8M14 figures from ACEA show a total of 1,328 light commercial vehicles (LCVs) sold in country, with a further 1,431 medium and heavy commercial vehicles sold, plus a further 164 buses, for a total of 2,923 units sold year-to-date, down 8.2% y-o-y.
Adding the 2,923 CV units to the 9,795 PCs sold over 8M14 makes for a total new vehicle market of 12,718 units. On current sales trends, this leaves the Lithuanian new vehicle sales market on target to hit BMI's forecast of 19,128 units for the full year.
Food & Drink
Lithuania Food & Drink
Lithuania has finally escaped the most severe economic crisis over the past decade. The post-downturn period will be marked by modest economic expansion, with forecast real GDP growth of 3.4% in 2013 and 3.6% in 2014. Recovering consumer optimism will be mitigated by persisting high unemployment levels and continued government austerity measures. High emigration levels and negative natural population growth will set the country's 3m population on the decline, which will become a fundamental obstacle for food and drink industry expansion over the longer term.
Headline Industry Data (local currency)
Per capita food consumption growth in 2013: +2.68%; compound annual growth rate (CAGR) to 2017: +4.00%
Alcoholic drinks sales value growth in 2013: -0.55%; CAGR to 2017: +4.14%
Total mass grocery retail sales growth in 2013...
Lithuania Freight Transport
Lithuania has seen robust economic growth, due to improvements in household consumption and strong exports, and has prompted a revised forecast of 3.4% year-on-year (y-o-y) real GDP growth, up from our previous forecast of 2.6%. This growth is reflected the country's freight sector, particularly the air freight sector, which is forecast to see growth of 9.68% y-o-y in 2014. Rail freight is also showing signs of steady, though modest, growth over our forecast period.
Lithuania's freight industry closely correlates with the health of the eurozone and in particular, the country's biggest trade partner, Russia, as these are the country's largest export markets. Therefore, the strength of the euro plays a key role in Lithuania's exports too.
Growth in Lithuanian exports of goods and services remained in the double digits, averaging 14.6% year-on-year (y-o-y) in the first two quarters of 2013. Although higher household...
BMI View: There is cautious optimism in the Lithuanian construction sector, bolstered by improvements in the domestic economy and stronger export performance. Although these factors will prove potent enough to help the sector return to positive growth territory in 2013 and 2014, the medium- to long-term outlook will remain less impressive, owing to uncertainties surrounding key transport and energy projects. On the brighter side, its EU membership will attract investors, helping the sector post annual average growth of 3.6% between 2014 and 2023.
The key projects and developments are:
Port Expansion: The Lithuanian port sector received a boost from the EUR44mn (US$57.2mn) loan agreement signed between the Nordic Investment Bank (NIB) and the Klaipeda State Seaport Authority in March 2013. Funding will be used for the reconstruction of...
BMI View: Lithuania ' s insurance sector has many strengths. However, the outlook, both over one and five years, is fairly uninspiring. As of late 2014, we see the strong sales in new business reported by some life insurers as being a one-off factor associated with Lithuania ' s adoption of the euro (and, therefore, 0% interest rates on bank deposits). The life insurance segment remains very under-developed by most metrics. Accordingly, we think that the main challenge - the low levels of income of most households - persists. This means that we still look for (low) single digit growth in life premiums through the forecast period. In the non-life segment (which is also under-developed) the main challenge is different, but should also result in sluggish premium growth. In spite of...
Lithuania Medical Devices
Espicom Industry View: Lithuania's medical device market is returning to growth, having suffered in line with the global economic crisis in 2009 and 2010. The past three years have seen strong growth, and in 2013, the Lithuan ian medical device market wa s valued a t an estimated US$257.4mn, or US85 p er capita.
Headline Industry Forecasts
In 2013, the Lithuanian medical device market was valued at an estimated US$257.4mn, or US$85 per capita. After experiencing a contraction in 2009 in line with the global financial crisis, it returned to growth over the 2011-2013 period.Â By 2018, BMI Espicom forecasts the market will be valued at US$328.7mn or US$...
Pharmaceuticals & Healthcare
Lithuania Pharmaceuticals & Healthcare
BMI View: Â Collective procurement of medicines with Latvia and Estonia will benefit the development of the pharmaceutical market , albeit at the cost of pricing cuts. While these markets are singularly small, together they represent an attractive and modest - sized market. The Lithuanian market on its own will pose a modest opportunity for drugmakers due to its small absolute size relative to its neighbouring markets. We expect the Lithuanian pharmaceutical market to post a local five-year compound annual growth rate (CAGR) of 3. 7 %, rising to LTL2.1 0 bn (USD7 29 mn) in 2018.
BMI View: With organic growth in the mobile sector all but played out, Lithuanian operators are now focusing on improving their subscriber mixes in favour of more lucrative postpai d services. So far, they have reported mixed success and, although blended ARPUs declined at a slower rate in 2012, it was clear that increased data consumption was still insufficient to cushion the effects of declining voice usage and mobile termination rate cuts. That said , t here was an uptick in data consu mption in 2013 and a rise in the number of multi-product bundles, which bodes well for quad-play offerings should these emerge. As it is, we continue t o forecast revenue , and therefore ARPU contraction...
BMI View: Â Overall we maintain our outlooks for the Baltic states' tourism sectors over 2015. Although the countries stand to lose out due to the ongoing issues (both economic and political) arising from the Russia-Ukraine tensions, and this will constrain arrivals from these countries, we believe that these losses will largely be mitigated by increased inter-regional tourism within the three Baltic states, as well as from other European countries which increasingly view the Baltic region as a more stable alternative to Russia and Ukraine. In particular we feel that Lithuania's tourism sector could see substantial growth over the longer term if its bid to join the euro is successful, as it will facilitate multilateral tourist traffic from and to the eurozone . Â
One of the main developments over 2014 has been the advancement of the proposal to...