Lithuanian Economists: Current Prices Not a Shock, Future Impact Limited

Lithuanian economists Nerijus Mačiulis and Aleksandras Izgorodinas suggest that current economic conditions and potential geopolitical shifts will not drastically impact Lithuania's economy. While acknowledging the ongoing conflict's effects, they argue that the changes experienced so far have been relatively minor for the country.

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The changes that occurred at the beginning of the war did not significantly affect Lithuania. Of course, fuel became a bit more expensive, but an excise tax relief for diesel was applied.

Mačiulis explained that even during periods of rising fuel costs, Lithuania has not seen a significant decrease in consumption or purchasing power. He pointed to measures like excise tax relief for diesel and the use of funds withdrawn from pension funds as factors supporting consumption. He contrasted the current situation with the 2022 energy crisis, where natural gas prices were five times higher and electricity prices nearly ten times higher, yet Lithuania's GDP did not shrink, and household consumption remained largely stable.

Both economists believe that even if a peace agreement is reached and the Strait of Hormuz fully opens, the resulting decrease in fuel prices might slightly increase purchasing power but will not fundamentally change Lithuania's economic trends. They emphasize that economic growth and consumption are inertial processes requiring a substantial shock to alter their course.

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In essence, this year residents can buy more diesel and gasoline for the average salary than a year ago.

Izgorodinas concurred, noting that markets have shown more calm and optimism regarding a potential agreement. He stated that the impact on Lithuania has not been as negative as initially feared when the conflict in the Middle East began. The economists' assessment suggests that Lithuania's economy is robust enough to withstand moderate external shocks without significant disruption, highlighting the resilience demonstrated in previous crises.

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The impact was not as negative as could have been expected at the beginning of the conflict.