As the new year begins, we present the most important expected economic and business events in 2021.
The economy is expected to grow this year after the recession caused by the coronavirus pandemic in 2020. The Bank of Lithuania (LB) forecasts that the country’s gross domestic product (GDP) will grow by 1.9 percent this year. If the pandemic is successfully managed, growth would reach 4.5 percent, and if it lasts, GDP would fall by 3.3 percent. The Ministry of Finance estimates that GDP could grow by 2.8% in 2021. The country’s exports are expected to grow by 4-6%. Average annual inflation is expected to reach 1.1-1.4%.
It is forecasted that the Lithuanian general government deficit will reach 7%. Government will have to cover the difference with borrowed funds. Uncertainty will encourage companies to limit investment. On the other hand, they may be encouraged by the DNA plan and European Union aid. Aid could increase total investment by 2%. The growth of the average wage will slow down to 2.2–4.1 percent. Income inequality and poverty will continue to be a major problem in Lithuania.
Economic Recovery Plan
In December the European Union negotiators reached an agreement on 672.5 billion for the Recovery and Resilience Facility. Facility is devoted to help EU states to cope with the economic consequences of pandemic crisis.
Lithuania will have to present an economic recovery plan to the European Commission by 30 April. In 2021, the Government intends to finance the projects of the so-called DNA Plan of the Future Economy from this measure, worth 813 million euro. The projects so far are removed from this year’s budget. They will be reviewed in spring, when the budget is going to be adjusted.
During the implementation of the Baltic railway project Rail Baltica, it is planned to complete the construction of the Kaunas-Palemonas section in the second quarter. The construction of the first 66 km of the section from Kaunas to the Lithuanian-Latvian border is planned to start in the second or third quarters. Lithuania asked for 298 million from ES last year for Rail Baltica. ES supported Lithuania with € 29 million. Country still needs EUR 1.8 billion to implement the entire project by 2026.
More than 100 million EUR worth 94-megawatt Pomeranian wind farm should start operating in spring. This project in Poland is being implemented by Ignitis Group.
Lithuania will continue to concentrate the efforts of the European Union institutions and member states to boycott the electricity imports of the Astravas nuclear power plant. Belarus promises that the first reactor will be fully operational in the first quarter of 2021. Lithuania will continue to demand that Astravas meets international safety requirements. Lithuania seeks to be able to monitor the process as well.
Western Wood Group (VMG) is one of the largest wood and furniture production groups in the Baltic States. Last year it completed the construction of a 140 million EUR worth wood chips plant in Akmenė FEZ. Another 76 million EUR worth furniture plant construction is in the process. In the middle of this year VMG intends to start the construction of the third factory of engineered wood construction. The investment will reach about 130 million. At least 350 new jobs will be created in 2023.
The German company Homanit plans to launch the construction of approximatelly 100 million EUR worth wood fiber board factory at the end of this year or the beginning of 2022. Construction site is in Pagiriai, near Vilnius. 440 employees are promised to be employed here. The new plant is scheduled to become operational in the second half of 2022.
International medical device manufacturer Intersurgical intends to finalize a construction of the new 18 million worth plant in Visaginas. It plans to expand further in the future, but the company’s executives have not yet revealed specific plans.