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 real GDP growth outlook for 2015 and 2016 as the impact of Russia's economic crisis on Lithuania has been more pronounced than we anticipated. While weak external demand will not leave domestic demand unscathed, private consumption will remain the main driver of growth in the coming quarters.
Subdued export growth has weighed on Lithuania's external accounts in 2014 and will continue to do so in 2015, reflected in the current account surplus remaining in deficit in 2015. For 2016, we forecast the deficit to reverse back into surplus due to the brightening outlook for external demand from Lithuania's main export markets.
Relations between Lithuania and Russia will remain tense, as Vilnius maintains a tough stance towards perceived Russian expansionism. However, tensions are unlikely...
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
The escalating trade war between Russia and the EU prompted us to revise down our forecast for growth in Lithuania for 2014. Growth will accelerate in 2015, as geopolitical tensions in the region disperse, trade restrictions get lifted, and overall external demand improves. However, with the situation in the region far from certain, Lithuania's freight industry may well bear the brunt of any further tensions should exports drop as a result.
Our expectation for a slowdown in Lithuanian economic growth appears to be materialising. The main factor behind this trend is softer external demand on the back of the Ukraine crisis (see 'Growth Outlook Sours' May 20 2014). However, escalating trade wars between Russia and the EU exacerbated the slowdown, prompting us to revise down our 2014 growth forecast - to 2.6% from 2.9% previously.
According to the Bank of...
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: 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.
One of the main developments over 2014 has been the advancement of the proposal to include...