International Trade in Lithuania

News Related to International Trade in Lithuania

Business outline for Lithuania

Main Industry Sectors

Agriculture contributes around 3.6% to the GDP. Lithuania's main agricultural products are wheat, wood, barley, potatoes, sugar beets, wine and meat (beef, mutton and pork). Nearly 7.7% of the active population works in agriculture.

The main industrial sectors of Lithuania are electronics, chemical products, machine tools, metal processing, construction material, household appliances, food processing and light industry (including textile), clothing and furniture.  The country is also developing oil refineries and shipyards. The industrial sector contributes 30% to the GDP and employs 30% of the active population. 

Lastly, the services sector contributes almost 60% to the GDP, and the sector of information technology and communications is the most important.

Economic Overview

Lithuania became independent in 1990. Since then, it has gradually moved from a centrally planned economy to a free market economy. After its independence, the country started a process of privatization aimed to liberate its economy. In recent years, the economy has had strong growth (an average of 8%). Private consumption and foreign investments are the main economic growth drivers.

Lithuania was affected by the financial crisis in 2008, even though its economy was beginning to show the signs of over-heating before the arrival of the crisis.  The progress of the inflation and the trade balance deficit were already difficult to control, and the situation worsened with the arrival of the crisis.  Therefore, Lithuania experienced a recession in 2009, a fact that was notably manifested by a drop in domestic demand.  The GDP had a drop of 16.8% in 2009 and 3% in 2010, but it seems to be rising again slowly.  However, Lithuania appears to be the least affected country among the three Baltic states, due to the fact that its banking system was less exposed and its industrial sector is diversified. The emergency aid accorded by the European Union came along with an austerity policy and unpopular budget cuts.  The unemployment rate affects more than 15% of the active population, the underground economy increased to around 30% of the GDP. Lithuania's foreign debt rose to 29.3% of its GDP in 2009.  The revival is on its way, inflation was rapidly controlled and the exports have picked up again.

FDI in Figures

According to the Lithuanian Statistics Department, foreign direct investment reached LTL 34.6 billion in January 2008, which means a growth of nearly 20% in one year. With the global economic crisis, foreign investment in Lithuania experienced a slight decrease in 2009. Sweden remains Lithuania's main investor. 

FDI increased 10% in 2010, in relation to the previous year.  The specialists are optimist in regards of the future economic situation of Lithuania's economy and expect it to be very promising.

FDI Government Measures

Lithuania's laws ensure equal treatment between foreigners and domestic investors. No special permit from government authorities is necessary in order to invest foreign capital in Lithuania. Apart from a few exceptions, nearly all sectors of the economy are freely accessible. To encourage investment, the government has also created free economic zones with tax benefits and one-stop-shop services.

Country Strong Points

Lithuania is ranked among the fastest growing economies in the European Union. It offers investors a diversified economy, a skilled workforce, low corporate taxation, the best developed road network in the region and a stable and democratic political system. The country is a member of the European Union and at the same time it is close to the eastern European countries. Lithuanian legislation offers equal protection for both foreign and domestic investments.
Lithuania is going to benefit from significant European Union assistance over the period of 2007-2013, which means the country is going to be able to invest in infrastructures and business opportunities will be available to local and foreign investors.

Country Weak Points

The country has a number of weak points:
- Lithuania's income level is still below the European countries' average. This involves re-adjusting the selling prices of products;
- There is a high rate of Lithuanians emigrating to other European countries;
- High wage inflation (nearly 18% in 2007); and
- Relatively inefficient bureaucracy. Corruption and a lack of transparency in certain areas of the economy slow down the country's development and could discourage potential investors.

Foreign Trade Overview

Since several years ago, foreign trade in Lithuania has shown a deficit.  This can largely be explained by the fact that the country imports from Russia a large amount of gas, and its price has been increased.

In 2008, exports increased almost 28%, a trend that was confirmed again in 2009 and 2010, with mineral products in the lead (more than 24% of the total), followed by transport and electric equipment (10.2%), biotechnology (7.9%), plastics, and Laser technology.  Russia is the main trade partner of Lithuania.  The other clients of the country are Latvia, Germany and Poland.  The European Union accounts for 64% of total exports in 2009. 

The majority of the country's imports come from the countries members of the European Union.  The main suppliers of Lithuania are Russia, Germany, Poland, the Netherlands and Latvia.  The country main imports are mineral fuels and oil (33%), vehicles, electrical and electronic equipment (12%) and plastics (11%).  In 2009, the countries of the European Union accounted for almost 58% of Lithuania's total imports.