A shrinking Baltic nation looks to the euro

By bne IntelliNews January 8, 2015

Linas Jegelevicius in Vilnius -

 

At the end of last year Jonava municipality in central Lithuania moved to abolish 10 villages that had been thriving in 1990 but have been left almost completely deserted because of emigration over the past 25 years.

Jonava is not a rarity. Since Lithuania regained independence in 1990, and particularly since it joined the European Union in 2004, Lithuanians have headed west to look for work and a better life, creating a serious demographic problem. The reverse flow, immigration, has been larger in  recent years, but despite the recent economic recovery and the adoption of the euro at the start of this year, there are few signs so far that the emigration trend will end.

The Baltic country has the worst emigration record in the European Union. According to Eurostat, the EU’s statistical agency, the largest decrease in population in 2012 was reported in Lithuania (-10.6 per 1,000 inhabitants) and Latvia (-10.3 per 1 000 inhabitants). The two countries also had the highest negative migration rates, respectively 7.1 and 5.8.

According to  Lithuanian Statistics, some 16.9%, or 619,600 Lithuanians lived abroad during 2005-2014, but the number is thought to be at least double that, since many emigrants have not officially reported their departure.

During 2004-2009 around 16,000 Lithuanian citizens would  seek a better life abroad every year, according to Lithuanian Statistics, but there was a a spike in 2010 to 83,159 after the Baltic economic crisis, boosted by the introduction of a mandatory social security tax, which prompted emigrants already abroad to report their departure from Lithuania.

Since then the numbers have remained high:  41,100 people left the country in 2012, 38,818 in 2013 and nearly 33,000 decamped in the first 11 months of 2014. At the end of 2014 there was even a discernible edging-up in the numbers. Over most of early 2014 less than 3,000 Lithuanians crossed the border each month, but the numbers swelled to more than 3,500 at the end of the year.

“Obviously, the economics and life is not up to the expectation of many people,” Donatas Burneika, head of Lithuania’s Society Geography and Demographics Institution (SGDI), told bne IntelliNews.

The demographic impact has been startling.“The demographics in Lithuania are very worrisome,” says Vlada Stankuniene, professor at Lithuania’s Kaunas Vytautas Magnus University and head of its Demographic Research Center. “The mortality rate is the highest in the EU, so is the emigration. The languishing can be stopped neither by the increasing longevity, nor the declining emigration and improving economy. Already by 2040 Lithuania will have shrunk up to 2 million people and the trend will persist thereafter.”

The overall birth and death rate has been negative since 1990, and hugely so for the last five years. There were 42,120 deaths and 30,676 births in 2010, and the gap has remained deep and nearly intact since  – respectively 41,037 and 30,268 in 2011, 40,938 and 30,459 in 2012, 41,511 and 29,885 in 2013 and with similar numbers in 2014, though the statistics for the year are not out yet.

The decline of the population is damaging the country’s skill base, making some companies consider moving abroad. Already some headquarters have moved out of the country. Over the last few years, several large companies, such as Hanner, a Lithuanian construction group, and Vilniaus Prekyba, operator of retail grocery chain Maxima and trendy Akropolis malls, have moved their management abroad, choosing Holland, Cyprus, Latvia and Estonia. “Now we see that emigration of capital is starting,” says Nerijus Maciulis, chief economist of Swedbank of Lithuania.

The departure of workforce has been “a tangible strain” for local economy, says Vytautas Laurinaitis, mayor of the Šilutė Municipality in southwestern Lithuania.

“Politically, we are one of the very first municipalities to have reduced the number of local councilmen, due to the shrink of the population, from 27 to 25. There were 55,000 people in early 1990s and the 2011 national census put the number at  43,000,”  the mayor told bneIntelliNews.

Economically, the exodus and fewer mothers translate into a weaker local economy. “With the population shrinking and aging, we have nearly 5,000 jobless people, and, sure, fewer taxpayers therefore. Needless to say, the tax coffers are getting shallower, too,” Laurinaitis says.

Some politicians hope the euro may finally change these negative trends. “With the euro circulating, the Lithuanian economy should be muscling up, opening new markets and providing more opportunities for all. I really believe the euro economy, especially if it gets off to a good start, has the potential to defuse the lingering gloomy moods which often are here,” Naglis Puteikis, a Lithuanian parliamentarian, told bne IntelliNews.

 

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