MFA: Strategic opportunities for foreign exporters
In 2020, Lithuania could boast the smallest drop in GDP (−0.8%) in the EU and is among the EU member states that are expected to recover economically from the crisis the fastest in the next two years. The improved result – Lithuania’s economy was previously expected to shrink by as much as 7.5% in 2020 – is related to the fact that Lithuanian exports have remained resilient during the pandemic and mitigated the decline in domestic demand.
The second wave of covid-19 affected Lithuania more than the first, the number of new cases of the disease reached a record level at the end of 2020. This poses a new risk and makes it likely that the country’s economic growth will be slower than expected in 2021. According to the prediction of the European Commission, Lithuania will reach the previous level of GDP in 2022 at the earliest.
In March 2020, the government approved an unprecedented short-term economic stimulus plan of EUR 5 billion (10% of the country’s GDP), with the possibility of additional loans of EUR 5 billion from international financial institutions. Of this, EUR 1.136 billion was allocated to the package for entrepreneurs (a total of 35 thousand companies covering more than 200 different economic activities). Postponement of interest payments, a state guarantee for loans and leases, payment of part of the rental costs, allowance for wages, etc. were proposed to the affected companies.
The central bank’s proposal to establish a special fund that would provide rapid temporary financial assistance to large and socially important companies facing problems caused by the coronavirus crisis was also approved. The fund was allocated EUR 100 million from the state budget.
In May 2020, the Ministry of Finance prepared a long-term investment plan enabling the qualitative transformation of the Lithuanian economy in order to revive the national economy. The declared priorities are human capital, digital economy and entrepreneurship, innovation and research, economic infrastructure, climate change and energy. A total of EUR billion is planned for these long-term investments, of which almost EUR billion are new and additional investments, the rest are accelerated investments already planned.
Lithuania is currently in discussion with the European Commission on the preparation of the Recovery and Resilience Support Facility (RRF) plan. Within the RRF, EUR billion is allocated for Lithuania. Systematic reforms and interventions are planned in the areas of green transformation, digitization, innovation and science, education, health, social affairs and public finance. Lithuania is expected to allocate the most funds to green energy (37%) and digitization (20%).
The energy industry, railway and rail transport and the transport industry and infrastructure will remain strategic sectors for Czech solutions even after the end of the coronavirus pandemic, where opportunities for Czech companies derive from long-term government strategies.
Civil aviation industry
The Lithuanian government sees the development of air transport and related support activities as one of the potential directions for the future. Significant investments are directed to aviation infrastructure – for the period 2018-2022, the reconstruction of Vilnius Airport is planned for EUR 130 million, including the reconstruction of terminals, check-in areas and the construction of a multi-storey car park. The expansion of the airport terminal is also planned in Kaunas by 2022. The government estimates investments for the expansion and modernization of Lithuania’s international airports in Vilnius, Kaunas and Palanga by 2028 at around EUR 700 million.
The Ministry of Transport is also considering the construction of a new airport between Vilnius and Kaunas. The final decision on the construction is to be taken by 2022 based on the assessment of the increasing capacity requirements of air transport, the logistics of the overall concept of the transport solution (transport connectivity) and the requirements of nature conservationists. It is a viable project, in the case of the new airport, Lithuania is considering a public-private partnership. All these projects can bring interesting opportunities for Czech companies with experience of cooperation with the airport in Prague and other entities.
Transport industry and infrastructure
According to allcountrylist, Lithuania still does not have a high-quality and dense road network – the statistics of the local Ministry of Transport indicate 309 km of highways and 1,639 km of first-class roads. On the other hand, the density of Lithuanian roads of lower classes (19,592 km) approached the EU average. A total of six European road corridors pass through the territory of Lithuania.
Currently, the greatest emphasis is placed on the international transport corridor Via Baltica, the highway has been granted the status of special state importance. The reconstruction of the more than 120 km Kaunas–Marijampolė–Suwałki section is to be completed by 2026, with a total cost of EUR 4million.
The Lithuanian government pays increased attention to improving the quality of the road network and the construction of highways or city bypasses, including the use of EU funds. Particularly interesting projects are the completion of the road bypass of the capital, the renovation of the section of the A1 highway near Kaunas together with the construction of a new bridge, the modernization of the Vilnius-Utena road (with EIB financing), the road from Kaunas to the border with Latvia, and the development of electromobility.
In June 2018, Lithuania approved a new national energy independence strategy. The main vision of the document is to ensure the country’s complete independence in the field of energy, which Lithuania wants to achieve by strengthening the connection with continental Europe, disconnecting from the current BRELL grid system (Russia, Belarus and the Baltics), diversifying the supply of energy raw materials, strengthening domestic electricity production and achieving full independence from fossil fuels by 2050.
According to the new economic recovery plan, the Ministry of Finance intends to provide EUR 311 million to increase the use of renewable energy sources, increase energy efficiency and competitiveness of the energy sector.
The Ministry of the Environment has provided a €10 million subsidy from the Climate Change Program for the use of energy from renewable sources in public and residential buildings. This represents concrete opportunities for Czech companies in the form of supported development of renewable energy sources (30% in 2020, by 2030 this share is planned to be 45% and in 2050 up to 80%), especially wind and solar energy.
The restoration and modernization of the Kruonis pumped water power plant is about to improve, the situation in the field of energy efficiency, reduction of consumption and losses during production, transmission and consumption, use of modern technologies (Smart Grids) is to improve.
In May 2020, Lithuania and Poland signed an agreement on the construction of the Harmony Link submarine high-voltage cable between the two states. The European Commission provided EUR 720 million for the second phase of the Baltic electricity grid synchronization project with continental Europe, of which EUR 300 million was allocated to Lithuania. The decommissioning of the Ignalina nuclear power plant, financed for the most part from the EU, will continue for at least the next decade, tenders are being announced continuously.
Rail and rail transport
The railway network in Lithuania is less than half of the EU average (27 km/1,000 km²) with a total track length of 1,869 km, of which only 152 km are electrified. It is estimated that approximately 850 km of tracks need repair and modernization. Huge investments from the state budget and especially from EU funds continue for the Rail Baltica project (connecting the Baltic states with the EU and unifying the track gauge).
The total volume of project costs is estimated at EUR billion and 13 thousand jobs, the planned completion and commissioning is in 2026. In addition to this project, Lithuanian Railways is investing in the renewal of the rolling stock (most of the locomotives and wagons are outdated and require modernization or replacement ), electrification and modernization of signaling and security equipment.
The most interesting opportunities for Czech companies are the Rail Baltica projects, the electrification of the Vilnius–Klajpeda line, the Vilnius intermodal terminal, and the modernization of locomotives and wagons. In the future, high-speed trains are a priority in passenger rail transport in Lithuania. Related to this is the need to upgrade or build adequate infrastructure to enable transport at speeds over 200 km/h. This is a specific opportunity in the relatively near future for Czech companies with experience in the construction of high-speed railway infrastructure.