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)
New passenger car sales in Lithuania declined 3.8% in 2012, to 11,829 units, according to figures released by the state registration agency Regitra. New commercial vehicle (CV) sales also contracted in 2012 by 4.0%, to 4,504 units, according to figures released by the European Automobile Manufacturers Association (ACEA).
This gave a total new vehicle sales figure of 16,333 units for 2012, a decrease of 3.8%, a sharp reversal to the 63.9% growth observed in 2011.
Passenger car sales remained dismal in 2013. Sales for the first 11 months of 2013 came in at 10,884 units, a decrease of 1.0% y-o-y. BMI forecasts 2013 passenger car sales to remain marginally unchanged from the previous year, at around 11,800 units.
However, CV sales have performed well in 2013. According to the ACEA, Lithuanian CV sales rose 12.4% y-o-y for 10M13, to 4,252 units. We remain bullish on CV sales and...
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: The market metrics in Lithuania have, over the last two years or so, been more favourable than in the other Baltic states.
Key Insights And Key Risks
Given the country's economic and political history of the last 25 years or so, and the identities of the main players in the non-life and the life segments, one would expect that conditions in Lithuania's insurance sector would, overall, be similar to those of Estonia and Latvia. In the other two Baltic states, the insurance sectors are (greatly) strengthened by the dominant positions of the local operations of major multinationals. Across the sub-region, key players include five large Scandinavian financial services groups ( SEB, Swedbank, Gjensidige, OP Pohjola and I f Sampo...
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: We believe that although Estonia, Latvia and Lithuania will remain less successful than many of their Central and E astern European peers, the se Baltic countries will see a significant upswing in their tourism sectors over the next few years, largely owing to the development of inter- r egional tourists who are benefi ting from higher incomes. We believe that the Lithuanian accommodation sector will be a particular outperformer .
The increasing number of hotels in Estonia and Lithuania is likely to continue throughout our forecast period. Central and Eastern Europe is currently perceived as offering...