Lithuania And The Baltic States Guarding Against Inflation And Boosting Economic Growth

Baltic States like Lithuania are converging with their peers in Europe, despite suffering from high inflation in the post-COVID era. Reports point to wages doubling in Lithuania since the country joined the European Union, while consumer prices are up about 40% over the same period.

Benzinga first learned about Lithuania’s economic transformation and inflation hedging during an interview with Aušrinė Armonaitė, the country’s Minister of Economy and Innovation. The Minister said her focus was on easing economic crosscurrents through targeted stimulus and initiatives like foreign direct investment or FDI, as well as new global partnerships with the likes of Taiwan, which invested €3.5 million in Lithuanian laser technology.

With Lithuania growing richer on a GDP per capita basis (adjusted for purchasing power) than some of its peers in Europe, citizens’ living standards are improving. Accordingly, economic and political stability is attracting investment: last year, Lithuania saw nearly 5,000 new jobs created and €135 million in green-field investment. Continental AG CTTAY, PON Bicycle Holdings, Shift4 Payments Inc FOUR, Ryanair Holdings Plc RYAAY, and DriveWealth are among the firms taking an interest in the country.

“We’re on pace to achieve our targets for 2030,” says Invest Lithuania director Elijus Čivilis in an exclusive conversation with Benzinga. The director, who left his job in the private sector at IBM to teach and further Lithuania’s digital transformation initiatives, adds the country has already hit half of its targets for 2030.

“FDI is a fantastic engine helping Lithuania transform its economy from its traditional Soviet Union roots,” he explains in a statement. Adding that, Lithuania is becoming more of a technology, engineering, and life sciences powerhouse. “Our relationship with Taiwan is a great example. We have a license transfer agreement between our largest IoT [Internet of Things] manufacturer Teltonika and governmental agencies in Taiwan to produce semiconductors that are needed.”

Čivilis forecasts that this is just the beginning and that Lithuania will remain a stable middle-ground for business in the face of tension between big powers in the East and West. In a decade, semiconductors may even “make up 5% of Lithuania’s total GDP,” he said.

Russia And Ukraine Implications

Russian aggression is boosting Lithuania’s spirit and efforts to protect its interests, which are aligned with EU values and commitments.

“I think Russia’s existence has made us a stronger nation,” Čivilis said, pointing to a massive cyberattack that was recently perpetrated on Lithuania. “It failed to do any major damage to our national systems, and we wouldn’t have achieved this level of cyber maturity without having such threatening neighbors next to us.”

Consequently, Lithuania secures a top spot among countries leading in cybersecurity, and this is attractive to those looking to innovate in a politically and economically friendly environment.

“As a business, why would I go to Lithuania,” Čivilis put forth. "Well, in Lithuania, it’s the talent saturation that makes us very competitive, as well as capability and willingness to improve on what we can bring to the table."

"It’s the magic of not being perfect, and how quickly we’re able to adapt to new realities," he added.

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Steering Committees And Roadmaps

In the spirit of adapting to new realities, Čivilis thinks Lithuania’s economic and political climate will continue to enable more triple-digit growth across sectors like fintech and game development. He has high hopes that the country will attract over a billion in new investment over the next half-decade, and create over 20,000 jobs across the natural and life sciences, device engineering, as well as information and communication technology (ICT) industries.

“For example, we’re discussing our fintech version 2.0,” he says. “In our first stage, we got over 250 companies in the country, and this created a very vibrant community which we will keep up.”

Additionally, unlike some peers, Lithuania knows not to haphazardly send too much money to the supply side of its economy.

“Instead of just compensating energy bills, there’s a focus on investing in companies or granting them to implement energy transformation programs that reduce energy consumption or create green energy devices so that they can supply themselves,” Čivilis ends. “Another good example is what Lithuania did during the pandemic when tourism was hurting. We opened up a huge innovation fund for the industry to make a transformation during the crisis time.”

Photo retrieved from Invest Lithuania's website.