Even though Russia's sanctions have continued for longer than anticipated and Lithuanian transport sector will incur losses, nonetheless it is yet too early to talk about the impact on Lithuania's gross domestic product (GDP) growth, says Head of Financial Markets at Danske Bank Giedrė Gečiauskienė.
© A.Didžgalvio nuotr.

Danske Bank maintains Lithuania's GDP growth forecast without alternations, 2.7 percent GDP growth is projected for 2015 and 3.1 percent for 2016.

One of the main assessment criteria regarding Lithuania was an assumption that sanctions would be lifted in one to three months. Intense diplomatic work was expected to give a result. However, new challenges have arisen instead. Tighter control of Lithuanian road carriers at the border may be motivated by any reasons. Nonetheless, the result is the loss of revenue for carriers. Meanwhile, the exporters face a disruption of the supply chain and possible breach of contracts. Lastly, any restrictions on trade result in losses for companies, sectors and economy.

As a matter of fact Russia imposed similar tight checks of Lithuanian vehicles at the same time last year. Many must have forgotten the arguments behind the last year's move. Explaining Russia's actions is becoming vain, people should instead focus on finding prompt solutions.

In 2013 thorough inspections were lifted after four weeks of intensive diplomatic efforts and direct dialogue with Russia, as well as support from the European Commission. That period of restrictions did not have a visible impact on Lithuania's economy. For example, road transport sector's revenue from foreign trade in the fourth quarter of 2013 even increased year-on-year and quarter-on-quarter. Lithuania's GDP growth was 3 percent in the third quarter of 2013, 3.3 percent in the fourth quarter of 2013 and remained the same in the first quarter of 2014.

According to Gečiauskienė, revenue of road carriers from foreign trade is substantial and constitutes 4.3 percent of Lithuania's GDP. That is why Danske Bank carefully evaluates the impact of trade restrictions on Lithuania's economic growth and is concerned over possible negative impact.

Although it is unknown for how long the situation will continue but even if it does it will affect only a portion of road carriers as Lithuania's export to Russia accounts for around 20 percent of the total export.

Next, the impact should be only on road freight transport sector because in the worst case goods can be carried using vehicles of other countries.

Lithuanian transport sector will incur losses but it is too early to talk about definite influence on GDP growth. Thus Danske Bank maintains Lithuania's GDP growth forecast at 2.7 percent in 2015 and 3.1 percent in 2016.

It is forbidden to copy the text of this publication without a written permission from ELTA.

Prime Minister vows to balance 2020 budget after tax proposals rejected

Lithuanian Prime Minister Saulius Skvernelis says his Cabinet's updated 2020 state budget plan...

Skvernelis: risks involved in Belaruskali's investments in Klaipeda are conrolled

Lithuanian Prime Minister Saulius Skvernelis says his government controls the potential risks...

Japan plans to involve in Baltic synchronization project

The Baltic states, which are gearing up for the synchronization of their power networks with those...

Lithuanian researchers developed new technology for precision grinding

A team of researchers at Kaunas University of Technology (KTU) has developed a novel approach to...

Real estate tax expansion amendments returned to government

The Seimas of Lithuania lacked several votes on Tuesday to accept a proposal to expand the real...