'Out-Of-The-Box' Approach Helps Lithuania's Aušrinė Armonaitė Build Strong Economy

Lithuania, which was in the news this week for its opening of a trade office in Taiwan, is seeking to dampen the blow of economic crosscurrents by diversifying its dependencies via new global partnerships, foreign direct investment (FDI) initiatives and education.

That’s what the country's Minister of Economy and Innovation Aušrinė Armonaitė told Benzinga during a private conversation at last week’s Web Summit in Lisbon, Portugal.

“We’re working diligently to make Lithuania more visible. We have many achievements people are not aware of,” she said about Lithuania as one of the most flexible and digital countries.

“I think that a global economy and partnerships make us more wealthy, happy and healthy.”

‘Out-Of-The-Box Thinking’

The 33-year-old Vilnius native became Lithuania’s Minister of Economy and Innovation in 2020. Since landing the role, Armonaitė’s administration survived tests from the pandemic and, thus far, war and recession. This is, in part, the result of scrappy, “out-of-the-box thinking.”

“We had quarantine regimes and stimulus to maintain liquidity among businesses, like many of the other countries,” she said about Lithuania injecting nearly €5 billion into the economy.

It was a rising tide that lifted all boats, Armonaitė added, noting the measures were a requirement for Lithuania to bolster competitiveness and growth, which did not stop during the COVID-19 pandemic.

“Now, with this energy crisis and the implications of war, it’s very tempting to flood the system with money and calm everyone down. But, we have to consider whether we are truly investing in the transformation or just keeping the status quo.”

Armonaitė aims to avoid haphazardly sending too much money to the supply side of Lithuania’s economy. One way her administration is avoiding malinvestment is education.

“We want to establish incentives for businesses to transform, not maintain their operations as is because, when there is no progress, we can just lose money,” she said on creating a program through which Lithuanians can procure “dual-program degrees” at home and abroad.

“It will be a brain gain,” Armonaitė added, noting that “talent is the main resource for the new economy.”

Three Priorities To Advance

Fueling Lithuania’s economic powerhouse are its natural and life sciences, device engineering, as well as information and communication technology (ICT) industries.

“The biotechnology and life sciences industry is growing 22%, annually,” Armonaitė said, noting “Thermo Fisher Scientific Inc. TMO is one of Lithuania’s biggest corporate taxpayers” with contributions that help bolster the country’s existing funding commitments for “bid ideas and innovation” across fast-growing areas such as laser and Internet of Things (IoT) technologies.

Innovation and progress are important to Armonaitė because Lithuania is a development hub and 80% of its GDP comes from exports. That said, further bolstering Armonaitė’s efforts are Lithuania’s foreign direct investment initiatives (FDI).

In short, Armonaitė said investors view Lithuania as a stable location for investments, and the companies already operating in the country are seeing tremendous growth. In fact, 2022 likely ends as a record year for Lithuania in terms of the number of FDI projects that are ongoing.

See Also: Taiwan's Lithuania Chip Plan Fuels Tensions With China

ECB, Tightening And Austerity

Lithuania formerly adopted the euro in 2014 to improve commerce, reduce transaction frictions and establish increased geopolitical security. The move was not without opposition, as some thought the cost of membership was not warranted for such a small country.

Years after, Armonaitė said robust economic growth validates the move. The financial scheme has decreased economic volatility in Lithuania, making it more competitive with other countries in the European Union. Adding, as the bloc seeks to tame inflation, Lithuania needn’t engage in serious “measures of austerity” that would cut into planned growth, potentially.

“If we did not coordinate, then we would have a race,” Armonaitė said. Borrowing costs could be higher, pushing the desired deficit balance. “We don’t want to exceed 5% deficit. We’ll probably come in at 4%, given the energy crisis.”

Diversifying The Export Market

Because Lithuania is so small and reliant on exports, Armonaitė is hedging the energy crisis and war by diversifying its export market.

“If demand were to drop in our main trade partner Germany, we would feel it immediately. We want to soften the consequences and that’s why we want to diversify into places like Asia and continue to support our relationships with the UK, US, and Poland."

Armonaitė noted the relationships are built to stand the test of time and are reciprocal; alongside the expansion of its Asia offices, Taiwan invested €3.5 million in Lithuanian laser technology.

“I have no doubt that our work with this promising market will intensify further after the opening of the Lithuanian trade office in Taipei,” Armonaitė said in a statement.

Building Supply Chain Security

The events transpiring in Ukraine, Armonaitė ended, have prompted Lithuanians to step up. “In three days, Lithuanians were able to help Ukrainian citizens buy a military drone. That was not government support. It was citizens sympathetic to the Ukrainians.”

Benzinga asked whether the conflict in Ukraine has Lithuania on edge. In short, Armonaitė said the country is seeking to secure its supply chains and this could do less to promote disinflation through globalization.

“We even have to reduce our reliance on the likes of Sweden, a true friend and great energy partner,” Armonaitė said. “We’re investing €1.5 billion to strengthen our electric generation.”

See Also: Forex Trading in Lithuania

Photo: CC BY-NC-ND © ALDE Party via Flickr Creative Commons