1.       The 25^th survey of the Lithuanian economy conducted in January 2010 indicates that market participants are more optimistic now than they were in September 2009. However, the optimism is very modest. Market participants predict that the Lithuanian economy will continue to contract in 2010, with unemployment being on the rise. 

2.       According to the survey, the country’s economy will continue to contract insignificantly in 2010 – GDP will decline by 1 percent. Market participants polled by LFMI think that Lithuania’s GDP went down by 14.5 percent in 2009.

3.       While evaluating the forecasts of GDP growth and corporate financial indicators in relative terms, it is important to consider the base effect. The Lithuanian economy shrank by nearly 15 percent in 2009, and the one-percent drop in GDP in 2010 has been projected keeping in view the markedly contracted GDP base in 2009. Therefore, GDP will go down very negligibly in 2010 compared to the year before, but the volume of GDP will be much smaller than that before the economic crisis. Equally the same, although companies’ financial indicators are projected to improve in 2010 in relative terms, the improvement in absolute terms (in Litas of profit, in Litas of invested capital and the like) will be very negligible since relative indicators are calculated from a diminished base of return on equity, income or profit.

4.       Market participants think that the situation in the Lithuanian labour market will deteriorate further. According to the survey, unemployment stood at 15.2 percent last year and will rise to 17.1 percent in 2010 (in September 2009 the LFMI respondents projected that unemployment would be 15.3 percent in 2010). Experts polled by LFMI think that 35 percent of the unemployed were unable to find jobs in 2009 as a result of factors, not related with economic decline. Fifteen percent, or 40 thousand, jobless people could have found jobs last year, if the minimum wage had been slashed and labour regulations loosened.

5.       As the survey demonstrates, exports will continue to grow at a higher rate compared to imports. Market participants forecast that imports will grow by nearly 2 percent in 2010 and exports will edge up by 5.3 percent.  A negative GDP forecast and the projected five-percent export growth indicate that market participants anticipate a faster recovery of foreign markets compared to the Lithuanian market and see exports as the course for the recuperation of the Lithuanian economy.

6.       The LFMI survey shows that illicit activity remains an acute problem of the Lithuanian economy. According to market participants polled by LFMI, the share of the shadow economy in GDP accounted for 23 percent in 2009. The share of the shadow economy is expected to increase in 2010, accounting for about 27 percent of GDP. The LFMI respondents reported that 37 percent of businesses were involved in illicit activity in 2009, and a total of 42 percent of the Lithuanian enterprise will go off the books in 2010. The rapidly expanding shadow economy can be related to both the worsening economic situation and an improper economic policy which lacks indispensible reforms.

7.       According to the LFMI survey, the regulatory burden for companies not just remained unabated, but also turned heavier in 2009. Market participants think that the regulatory burden increased by nearly one-tenth (about 8 percent) last year.

8.       The growing tax burden is among the causes of the swelling shadow economy. As the LFMI survey shows, the tax burden was as much as 37 percent of GDP in 2009. Market participants believe that the tax burden will continue to grow, constituting 38 percent of GDP in 2010.

9.       Market participants think that households’ financial situation will deteriorate in 2010 compared to 2009. According to the survey, average personal earnings will decline, household savings will decrease in line with falling household income and households will spend less money on consumer durables. As the LFMI survey shows, average net earnings amounted to about 1,620 Litas per month in 2009, a nearly 10-percent slide compared to 2008. Market participants believe that average net earnings will continue to drop, by 6.5 percent, totalling 1,514 Litas per month in 2010.

10.    According to the survey, the year 2010 will be more auspicious to companies than the previous year. Market participants believe that the profit margin and the return on equity averaged 2 and 4 percent respectively in 2009. They expect that both the profit margin and the return on equity will increase and average 3 and 5.2 percent respectively in 2010.

11.    According to the LFMI survey, the price of borrowing will go down in 2010 compared to 2009. Market participants think that interest on loans in Litas was between 8.5 and 9 percent in 2009.