Lithuanian industrial production falls 7%

By bne IntelliNews September 24, 2014

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Lithuanian industrial production dropped 7% month on month in August, with intermediate goods and consumables leading the fall. That suggests the country remains highly vulnerable to decreasing demand out of Russia, as well as the Kremlin's ban on food imports. Dropping confidence may also be hitting domestic demand.

Statistics Lithuania released data on September 23 showing that industrial production totalled LTL5.4bn (€1.6bn). That constitutes a 7% fall compared to July, or 3.6% seasonally adjusted. On an annual basis, industrial production decreased 5.7% last month.

August was the first month of the Russian embargo, instituted in retaliation for Western sanctions over Moscow's role in Ukraine. Lithuania is amongst the most hawkish members of the EU on the topic; it is also recognised as the most exposed to the Russian food ban.

Lithuanian dairy goods - as well as its vital transport sector - have been front and centre of the Ukraine crisis for some time. Citing "health concerns”, Moscow banned milk and cheese from the country in the run up to last November's EU summit in Vilnius, at which former Ukrainian president Viktor Yanukovych was due to sign off on a pact with Brussels. His failure to do so sparked the protests that eventually unseated him. 

While neighbour and fellow hawk Poland will lose a larger overall volume of trade - particularly fruit and vegetable sales - because of the ban, food exports to Russia constitute just 0.2% of GDP for the country. In contrast, food exports to Russia make up 2.7% of the Lithuanian economy.

However, others suggest that the effects of the weakened ruble and food ban on the Baltics will be less direct. Capital Economics suggested recently that Lithuanian exports actually increased during the first half of 2014. Over the same period, Lithuanian industrial production fell 1.9% in annual terms to total LTL44.3bn (€12.8bn). 

However, the analysts note the effect on confidence in the small economy. "One particular point of concern is the drop in Lithuanian consumer confidence to a two-year low," Emerging Markets Economist Liza Ermolenko wrote. "On past form, this is consistent with flat consumer spending."


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