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
We have revised down our estimate for Lithuania's real GDP growth for 2015 as the impact of Russia's geopolitical and trade spat with the EU appears to have been bigger than we previously anticipated. Nevertheless, we maintain our forecast for the Lithuanian economy to rebound in 2016, as trade sanctions unwind and external demand for Lithuanian exports recovers.
We estimate Lithuania's external account surplus to reverse back into deficit in 2015 and remain in negative territory in 2016, as growing imports on the back of brightening domestic demand offsets the positive impact of export growth on the trade deficit.
Lithuania will remain caught up in the maintenance of geopolitical tensions between NATO security structures and Russia, as both sides step up their military activities in Eastern Europe,...
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
While a breakdown of the Q314 GDP figure is not available at the time of writing, we believe domestic demand has also suffered due to the significance of the external sector for Lithuania's small, open economy. Lending support to our view has been a series of high-frequency economic indicators. Industrial production contracted by 0.5% y-o-y in September on a workday-adjusted basis. While pointing to growing pressure on private consumption, the modest abatement in retail trade growth is also reflective of the resilience of the household sector, which has been bolstered by falling unemployment and rising wages.
Headline Industry Data (local currency)
Per capita food consumption growth in 2014: +2.9%; compound annual growth rate (CAGR) to 2018: +3.7%
Alcoholic drinks sales value growth in 2014: +2.0%; CAGR to 2018: +4.6%
Lithuania Freight Transport
BMI View: The slowdown in Lithuania's economic growth is forecast to come to an end with accelerated economic growth in 2016 and 2017 especially. The Ukrainian crisis and consequently softer external demand has been hurting the Lithuanian economy, impacting all freight transport sectors. Trade wars between the EU and Russia have slowed growth numbers for Lithuania's imports and exports, but with improving trade conditions and domestic demand increasing, we have a more positive outlook for Lithuania over the next few years.
As the Ukrainian crisis lingers, external demand from Lithuania's main trade partners has diminished, slowing down the economy. However, with growing domestic demand, Lithuania's economic growth is expected to accelerate in 2016 reaching its growth peak in 2017 before rates even out again. In 2016,...
BMI View: The deteriorating relations between Russia and the EU are proving to have a detrimental effect on Lithuanian economic momentum - weak demand from Russia and elsewhere, and poor investment confidence. However, the economy is forecast to strengthen beyond 2015 as the external situation improves, and while the infrastructure will ultimately stagnate over the next decade, there are still opportunities in construction, and EU-funded transport and energy developments.
In the long term, despite a slowing and moderated growth picture, we do not expect any major fluctuations, and while steadiness may not spell a market with abundant opportunity, investors can be assured of Lithuania's position as an attractive investment destination, owing to its EU membership. Lithuania's fiscal deficit converging with...
BMI View: Lithuania's insurance market is underdeveloped, with limited penetration and density in both the life and non-life sectors. However the country offers substantial growth potential and benefits from the presence of a number of large regional and global insurers which bring expertise and capital stability to the market. We are forecasting steady growth in premiums across the insurance market over the forecast period and in conjunction with a transparent regulatory environment this makes Lithuania an increasingly attractive investment destination.
The domestic economy in Lithuania is expected to slow somewhat in 2015 and 2016, and we have revised down our real GDP growth outlook for the country as the impact of Russia's economic crisis on Lithuania has been more pronounced than we had anticipated. As a result, we have...
Lithuania Medical Devices
BMI Industry View: Lithuania represents a small medical device market with potential for expansion. Entry to the eurozone in January 2015 and government commitments to improving healthcare provision are expected to contribute to growth. Accordingly, we forecast that the market will record a 2014-2019 CAGR of 4.4% in US dollar terms, ranging from 2.0% for orthopaedics & prosthetics up to 6.8% for dental products.
Headline Industry Forecasts
We forecast that the market will record a 2014-2019 CAGR of 4.4% in US dollar terms, ranging from 2.0% for orthopaedics & prosthetics up to 6.8% for dental products. Due to a weakening euro, we expect a 10.1% contraction in the Lithuanian medical device market in US dollar terms in 2015, before returning to growth in 2016. The market is projected to increase to USD421.9mn by 2019, or USD143 per capita....
Pharmaceuticals & Healthcare
Lithuania Pharmaceuticals & Healthcare
BMI View: Non-communicable conditions such as cardiovascular disease and cancer will continue to be the primary contributors to Lithuania's disease burden. Although these disease dynamics will make the country attractive to innovative drugmakers, the small size of the country's population will limit the commercial opportunity. The absolute disease burden is expected to decline over the next 15 years as the standard of healthcare improves and the population contracts.
Headline Expenditure Projections
Pharmaceuticals: EUR601mn (USD806mn) in 2014 to EUR618mn(USD680mn) in 2015; +2.7% in local currency terms and -15.7% in US dollar terms. Forecast revised downwards from Q215.
Healthcare: EUR2.14bn (USD2.87bn) in 2014 to EUR2.15bn (USD2.36bn) in...
BMI View: Lithuania's mobile market recorded negative growth in 2013 and the for first nine months of 2014, with incumbent Omnitel finally ceding its lead position to Tele2. The mobile market is saturated and as operators move customers to more valuable postpaid plans, so large numbers of inactive prepaid accounts are being eliminated. In Omnitel's case, this has yielded stronger ARPU figures and uncovered underlying positive ARPU growth that had previously not been visible. Consumers have become used to very low monthly mobile bills,...
BMI View: We continue to hold a broadly positive outlook for the Baltic countries' tourism sectors in 2016 and beyond. While these markets will continue to suffer the effects of political and economic turmoil in Russia and Ukraine, this will not prevent further robust growth in tourist arrivals. We expect growth to be supported by increased intra-Baltic and wider European tourism on the back of improving economic conditions across the continent. Of the three Baltic countries, we maintain our view that Latvia and Estonia will see the strongest arrivals growth over the next few years, averaging around 5-6% annually.
Key Updates & Forecasts
The Baltic region's tourism sector will continue to grow at a healthy rate in 2016 with visitor arrivals in Estonia, Latvia and Lithuania...