Due to the impact of these shocks, the average quarterly growth of household consumption may have slowed down from 0.9 percent. (2010-2019) to 0.5 percent. (2020-2024). This was significantly influenced by 2020. the onset of the COVID-19 pandemic and subsequent geopolitical upheavals.
“After the start of the COVID-19 pandemic, countries were forced to introduce quarantine and apply other measures to limit the spread of the virus. This resulted in significant business constraints or temporary suspensions, disruptions in supply chains. As the pandemic subsided, the Lithuanian economy was hit by a new wave of shocks caused by Russia’s war against Ukraine,” says Darius Imbrasas, Chief Economist of the Macroeconomics and Forecasting Department of the Bank of Lithuania.
According to him, due to the high energy dependence on Russia, the European Union’s decision to stop purchasing energy from this country was one of the main factors that led to a large price jump. In addition, due to the sanctions imposed on Russia and its supporting Belarus, the search for new suppliers of other raw materials, such as wood or metals, caused difficulties.
In order to first avoid the negative economic consequences of the pandemic, and then to mitigate the difficulties caused by the price spike, the authorities implemented a stimulus fiscal policy, applied support and compensation measures.
All these factors affected the consumption decisions of Lithuanian households. According to the economists of the Bank of Lithuania, shocks to the terms of trade and overall supply had the greatest adverse impact on household consumption costs – for example, a spike in energy prices or disruptions in supply chains. 2020-2024 they could suppress the development of household consumption by 0.2-0.3 percent. point per quarter.
The adverse effects of these shocks in 2021-2023 partially offset by increased government spending – energy offset measures, business support during the COVID-19 pandemic and other positive changes in aggregate supply.
The impact of credit supply and monetary policy shocks on the development of household consumption varied. 2020-2021 it was more encouraging in nature, but after the beginning of the Russian war against Ukraine and the jump in inflation, it became restrictive in nature, this was especially felt in 2023. This was due to factors such as increased risk aversion by credit institutions, stricter lending standards, credit volume restrictions, as well as monetary policy decisions adopted at the level of the euro zone, which led to an increase in credit interest rates.
The Bank of Lithuania predicts that real private consumption in 2023 after decreasing by 1 percent, this year it will increase by 3.6, and next year and in 2026. – 3.7 percent each
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2024-09-23 10:24:46
