Best EU Economy in Year of Covid Was Bloc’s Worst-Hit After 2008
(Bloomberg) -- The European Union’s worst-hit economy in the wake of the global financial crisis is looking like the bloc’s least affected during the coronavirus pandemic.
Lithuania suffered the deepest recession in 2009 as it became a testing ground for the harsh austerity that later ravaged Greece. This time, the European Commission reckons it will notch the shallowest contraction of all, with forecasts this month pointing to a dip in gross domestic product of just 2.2%.
In some ways, the Baltic country of 2.8 million people got lucky: its economy doesn’t rely on tourists, farmers enjoyed a bumper harvest and logistics companies benefited as shoppers across the continent ramped up online purchases. But the government and companies also learned lessons from the last crash, and were far more prudent in the runup to this one.
What’s more, Lithuania was lightening quick to respond to the virus’s first wave, imposing a lockdown with only seven confirmed cases of Covid-19 in the country to make it one Europe’s least-affected.
“Victories on the health front helped the fast economic turnaround,” said Indre Genyte-Geciene, chief economist at INVL Asset Management in Vilnius. “Businesses had also had a string of successful years. They were at the peak of economic cycle, with large financial buffers that helped them survive.”
That cushion was visible in state coffers too. Unlike the chaos after 2008, when Lithuania flirted with a bailout, saw workers flee westward and needed drastic spending cuts to stay afloat and adopt the euro, Prime Minister Saulius Skvernelis struck a reassuring tone when announcing March’s lockdown.
“There’s no issue with finances -- the state has enough funds accumulated,” he said in a televised address. Consumers took heart: Retail sales returned to pre-lockdown levels after just two months.
Indeed, years of budget surpluses saw Lithuania’s credit rating lifted to the same level as Japan’s. The government was able to provide a furlough program, delay corporate tax payments and subsidize self-employed workers. And without things like a national airline to rescue, expensive bailouts weren’t needed.
Many industries, on the contrary, thrived. Lithuania has the EU’s fourth-smallest share of sectors at risk from pandemic-related pain, while good weather helped it export the bloc’s second-highest amount of wheat this year.
A spike in demand for online services handed information and communications technology companies a second-quarter sales jump of almost 50%. Then there’s transportation.
Girteka Logistics, which owns Europe’s largest fleet of trucks and does 98% of its business abroad, saw shipment volumes climb as e-commerce surged.
“While Europeans stay at home to slow the coronavirus, Lithuanian trucking companies continue transporting essentials like consumer goods, food and pharmaceuticals for home consumption,” said Kristian Kaas Mortensen, Girteka’s director for strategic partnerships.
Despite a second virus wave inflicting greater damage than the first, he says the country’s ready, having endured much worse a decade ago.
“In Lithuania, we don’t cry,” Mortensen said. “Nobody’s afraid of a crisis. Everyone’s like, ‘yeah, we’ve been there, seen that. Whatever, let’s do it.’”
©2020 Bloomberg L.P.