Nerijus Mačiulis, chief economist at Swedbank Lithuania, says that although Lithuania's economy contracted by 0.6 percent in the first quarter of this year, such an economic stumble nevertheless did not halt job creation or growth of wages: the number of employed people rose by 1.7 percent in a year, while an annual growth of average wages stood at 4.3 percent.
Nerijus Mačiulis
© DELFI / Tomas Vinickas

According to the economist, trends in the labour market are inert, therefore, it is not surprising that short-term economic challenges did not manage to stop the positive changes in the labour marker. The main reason for the economic contraction was a decline of exports to the Commonwealth of Independent States and, in particular, to Russia. What is more, in early 2015, Lithuania saw more moderate consumption compared to late 2014 due to the introduction of the euro. But these two adverse winds were only temporary: today, exports to the EU are growing quickly, while Russia's embargo is likely to end in August; the growth of retail trade is gaining moment again.

In early 2015, wages in Lithuania grew also due to the adoption of the euro as not only prices but also wages and salaries were rounded up. Moreover, the introduction of the new currency was a convenient opportunity to negotiate a bigger salary.

"However, being in this situation, we should remember that the government did not do everything possible in seeking to speed up the growth of the purchasing power in Lithuania so that the country gets closer to the EU's average. Although the minimum monthly wage was constantly on the increase, the amount of tax-exempt income (NPD) was left out. Currently, the NPD for those who receive the lowest income stands at only EUR 166 per month or EUR 1,992 a year. NPD of EUR 1,992 perhaps could have been an adequate amount back in 1992, but in 2015 the NPD increase must be one of the top priorities," Mačiulis said.

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