Economic overview
The last Russian troops withdrew from Lithuania in 1993. But the country’s economy still is largely shaped by ties with Russia and other former Soviet republics. In recent years, as much as a fifth of Lithuania’s exports have gone to Russia. So, as Russia’s economy shrinks, the outlook for Lithuania has become gloomier. Gross domestic product growth came in at 2.9% in 2014 and is forecast to be 2.8% this year. But Lithuania’s economic options broaden as it reaches westward. The country joined the World Trade Organization in 2001; became a member of both NATO and the European Union in 2004; and adopted the euro in January of this year. What’s more Lithuania has a major advantage over many of its economic peer countries: no excessive deficit.
Business travel industry insight
Lithuania is one of Europe’s smaller travel markets, ranking alongside Georgia and Albania in 33rd place, according to Tourism Economics, part of Oxford Economics. But spending by corporate travelers should grow more than twice the European average of 4% over the next five years. Demand for hotel accommodation is expected to grow about 6% in the near term, putting upward pressure on rates. The few international chains active in Lithuania have focused on the capital city Vilnius. Carlson Rezidor is the best represented. Few new hotels are in the pipeline. Lithuania doesn’t have a national airline, but daily flights from Vilnius go to major cities like Amsterdam, Frankfurt, London and Stockholm (there isn’t direct service to Paris). Travelers also can fly Ryanair from the country’s second-largest city, Kaunas, to more than 15 destinations.
Opportunities
- The domestic market is expanding. The Bank of Lithuania forecasts domestic demand to be the biggest contributor to overall economic growth in the near future.
- Lithuania’s public sector is investing in a range of infrastructure projects, and that investment is expected to continue in coming years.
- Economists predict economic growth will accelerate to reach 3.4% in 2016.
Challenges
- The uncertain international economic environment may cause companies to put off investment in Lithuania.
- The average monthly wage in Lithuania is €699.80 before tax, well below most other EU countries. Wages remain low in spite of a 25% increase in the minimum wage in 2012 and another 25% increase in 2013.
- Despite government efforts to promote job creation, unemployment remains at about 10%.
When your business expands into new markets, BCD Travel can get your travelers where they need to be. Talk to your account manager about how we can support your company’s growth across the globe.
