The Lithuanian Economy

The economy of Lithuania has been dramatically transformed since the country declared its independence from the former Soviet Union in 1990. Most industry segments have been privatized and foreign investment has increased. Trade with former Soviet states has decreased as a percentage of total exports. Lithuania continues to experience an economic expansion reliant on its traditional strengths in engineering.

Lithuania experienced a period of very robust economic growth after it joined the European Union in 2004. Strong expansion of gross domestic product continued throughout most of the decade, with the 2007 GDP annual growth rate approaching 9 percent. The global financial crisis eventually affected Lithuania in 2009, resulting in a negative rate. GDP growth in 2010 was back to over 1 percent. GDP growth in 2011 was 5.9 percent, and GDP growth in 2012 was 3.5 percent. Currently, the total size of gross domestic product is $65 billion, as measured in dollars.

The number of jobs in the financial services sector has doubled in the last decade. The number of jobs in the agricultural sector has declined by one half over the same period. Economic growth is notably stronger in the areas of engineering and biotechnology. Lithuania has a concentration of laser companies such as Ekspla, designing lasers for material processing and manufacturing process control. The Maxima Group retail chain is based in Vilnius and is the largest employer in the Baltic region. The Vilnius Stock Exchange has operated since 1993 and facilitates Baltic area trades.

Lithuania has a long history of Russian interaction and intervention. After a period of German occupation during World War II, the Soviet Union laid claim to Lithuania in 1944. The status of Lithuania today is drastically different from its condition during the years following World War II. As a Soviet state, the economy of Lithuania was predominately agricultural, with notable additional output in textiles and engineering. A complete ban on private ownership of agricultural farmland from 1949 to 1952 resulted in a decade of production declines. Agricultural production levels eventually recovered in the 1960s to pre-war levels. With 40 percent of its land mass under cultivation, Lithuania was able to supply most of its own food supply and produced a surplus of flax and dairy products.

Although Vilnius was and still is the main engineering center, other locations of textile engineering and production were Kaunas and Klaipeda. Lithuania accounted for about six percent of the total output of machine tools in the former USSR. That legacy of machine tool design still resonates in today’s growth industries.

Vilnius continues to build on its heritage as a center of engineering excellence, combining the disciplines of mechanical engineering and information technology. Ekspla and other laser technology companies benefit from the expertise of the Institute of Physics at the University of Vilnius. The government of Lithuania provides funding to promote research in biotechnology, benefiting companies such as Fermentas and Sicor Biotech.