Lithuania Economy


With the achievement of independence in 1991, Lithuania’s economic system had to face a delicate phase of transition from a centralized system (prevalent in the Soviet regime) to a market economy dominated by private companies and commercially oriented towards countries. Western Europe. The transition proved to be extremely difficult also because within the Soviet system Lithuania had reached a production capacity that was considerably oversized compared to its internal needs, since it was also oriented to satisfy the demand of the other Soviet republics. With the lack of “natural” partners, the Lithuanian system first entered a crisis of overproduction, and then had to make sharp cuts in production plans. The active population, previously guaranteed by the Soviet model of full employment, paid the price for the decline in production. On the other hand, Lithuania’s attempt to break away from the ex-Soviet economic system by reconnecting with the other Baltic countries with a free trade agreement (1994), was not sufficient to compensate for the loss of trade with Russia: the three countries have in fact a substantially similar economy and afflicted by the same deficiencies. The severe economic difficulties produced a 25% decrease in gross domestic product in 1992, while the increase in the prices of fuel from Russia caused, especially in the early 1990s, a sharp decline in the production of goods and high inflation. In the course of this structural transformation process, privatizations, introduction of a new national currency (lita) released from the ruble area and greater capital transfers to the service sector. The determination of the prime minister, Adolfas Slezevicius, in accepting the recommendations of the International Monetary Fund for a rapid transition to a free market economy it paid off in 1995 when the economy began to show the first signs of recovery. The subsequent zeroing of the inflation rate (which went from 30% in 1995 to 0% in 2003), accompanied by an increase in lending and foreign investment, allowed the government to reach a GDP of US $ 47,304 million (2008) and to pay attention to the renewal of the tax system and financial policies, the expansion of privatizations and the management of the welfare state.


Agriculture still occupies almost a quarter of the active population and agricultural lands, which have undergone extensive reclamation work, have been privatized since 1991. The main crops are cereals (barley, wheat and rye), potatoes, beets from sugar, flax and vegetables. The cattle and pig breeding provides meat and dairy products. The fishing sector is important (especially herring and cod), which is modernly equipped.


The Lithuanian subsoil is not very rich in mineral resources (there are quantities of peat, clay and modest oil deposits). In order to make up for this shortage and compensate for the high price of fuel purchased from Russia, Lithuania built two nuclear power plants in Ignalina in the 1980s. The plants, similar to those in Chernobyl, supply a large part of the country’s energy needs, but raise significant safety concerns. In June 2000, the EU and other countries have pledged to finance its closure. Industry, which contributes 32.2% to the formation of the gross domestic product, is the leading sector of the economy and is specialized above all in the production of goods aimed at the entire former Soviet bloc. According to allcountrylist, basic industries include refineries (in Mažeikiai), petrochemical plants (in Klaipėda, Kaunas, Vilnius and Jonava), shipyards and mechanical industries. Rather developed, thanks to the presence of a highly qualified workforce, the electrotechnical and electronic sectors. Among the industrial productions are also the processing of agricultural and fish products, the textile, clothing, furniture and woodworking sectors.


Due to the narrow internal market, Lithuania is highly dependent on trade. For this reason, the dissolution of the USSR, the main reference market for its industrial products, had heavy repercussions on the economic level. The country therefore had to modify its commercial relations by intensifying relations with the Baltic states, the former Soviet republics and the countries of Western Europe. Russia and Germany are the main partners, to which are added, for exports (especially finished goods), Ukraine, the United Kingdom and Belarus, for imports (raw materials and energy resources), Poland, Italy and Sweden. The new monetary unit is the lita, the value of which, due to inflation, is not yet very stable. The association with the European Union (followed, in 2004, by joining as a full member) encountered a serious obstacle in a provision of the Lithuanian Constitution which did not allow land ownership to foreigners, in contravention of the principle of free movement established by the Union; the problem was solved with a constitutional amendment (1996). However, the general situation seems destined to improve also because Russia has agreed to apply the most favored nation clause to Lithuania, in practice equating the terms of trade with Lithuania to those in force with the other CIS countries. As for the communication routes, the country has a fairly developed network of roads (77,142 km, over 90% asphalted), railways (1,775 km) and inland waterways (477 km). Conspicuous voice of the economy is also tourism. Among the main places of interest, the capital Vilnius, whose historic center, rich in Gothic, Renaissance and Baroque masterpieces, was declared, in 1994, a World Heritage Site by the UNESCO, the Curonian Spit, which dominates the Baltic coast of Lithuania with its fine sand dunes and lush pine forests, and Palanga, the coast’s main seaside resort.

Lithuania Economy