The pandemic has disrupted the growth plans of many companies, in Lithuania and indeed across all of Europe. On the other hand, even as the second wave of the pandemic began, Lithuania was positioned as one of the EU member-states least impacted by Covid-19. Analysing the situation of industrial companies in the 3rd and 4th quarters of 2020, growth in orders and sales can be seen. The situation in these companies is quite stable, and they are expected to maintain higher production volumes through the end of the year, as much as such a forecast is possible in today’s conditions.
Several factors have had an effect on the recovery of Lithuanian industrial companies:
– The companies manufacture nearly flawless products at especially attractive prices and are able to compete with companies in other EU member-states.
– It is thought that the second wave of the pandemic may disrupt certain links in the supply chain and there may be a shortage of components necessary to produce finished goods. For this reason, OEM and TIER1 customers buying production from Lithuanian industrial companies are placing somewhat larger orders, seeking to ensure timely supply.
Lithuania offers the most important tax and administrative incentives to new foreign companies-investors seeking to relocate a manufacturing unit or even an entire factory from another country. The number of Lithuanian industrial companies is constantly growing; there were 7,267 in 2018, and 7,447 in 2019 (see figure No. 1).
The manufacturing sector comprises about 24.2% of Gross Domestic Product (GDP) in Lithuania. It is only to be welcomed that, even in the face of the pandemic, the Lithuanian manufacturing sector generated growth of 0.62% in the period between January and July 2020, compared to the 1st and 2nd quarters of 2019. Lithuania can take pride in increasingly active R&D operations. Comparing data for 2017 and 2019, R&D centres during the two-year period grew respectively from 47.1 to 68.9 million euro (see figure No. 2).
Figure No. 2
Lithuania is one of the countries least impacted by the pandemic. If we compare the 3rd quarter of 2020 with the same quarter in 2019, the change in Lithuania’s GDP was only -1.7%. For comparison, Spain’s decline during the same period was 8.1% (see figure No. 3).
Figure No. 3
In 2020, foreign-capital as well as Lithuanian-capital companies increased productivity, and invested in automation and digitalization. Increasing interest from Western European investors has recently become apparent in Lithuania. The free economic zones operating in Lithuania are strategically preparing to attract new investors by increasing the competitive advantages they offer.
Lithuania’s free economic zones closely cooperate with various government institutions, seeking to attract foreign investors to Lithuania. In today’s uncertain economic situation, this cooperation becomes even more important, because only by sharing experience and recommendations as well as initiating fundamental changes is it possible to achieve results that benefit all sides.
We can be pleased that the construction of new investors’ factories begun in 2019 at the Šiauliai and Kėdainiai free economic zones has already finished or will be finished in the near future. In the 1st quarter of 2021, the second-largest German automotive tail lift manufacturer Bär Cargolift will settle in at the Šiauliai FEZ, while Kormotech, a Ukrainian maker of wet food for pets, already began operations in July 2020 at the Kėdainiai FEZ. The pandemic did not interfere with the rapid setting-up of these companies’ operations in Lithuania; on the contrary, the pandemic accelerated the construction process.
Especially attractive terms and conditions for investors have been created at Lithuania’s free economic zones. The tax incentives are listed in figure No. 4.
Figure No. 4
For further information about investment opportunities, visit www.investmentpartner.lt