2024-07-05 11:17:31
Neighboring Estonians were not so lucky
The study revealed significant differences between the Baltic countries – here Lithuania stands out as a leading state. It turns out that the majority of the population of Lithuania – 41 percent. – does not feel the pressure of inflation on the purchasing power. Compared to Estonia and Latvia, increased prices have reduced financial opportunities for at least part of the population – 31 percent of such respondents in Lithuania, 39 percent in Latvia, and 53 percent in Estonia.
According to Citadele bank economist Aleksandrs Izgorodins, such a difference of opinion among residents of neighboring states is determined by Lithuania’s leadership. Looking at the residents’ opinion about their finances – according to the European Commission, in June it was the best in Lithuania since 2007. of March
“Wages have been growing faster than prices for some time, so recently the impact of inflation on the purchasing power of the population has decreased. The opinion of the Lithuanian population about the financial prospects has been good for quite a long time – a larger and larger part of the population sees and believes that their financial situation is improving.
On the other hand, Estonia also stands out – this is shown by both our survey and the indicators of the European Commission. The opinion of Estonian residents about financial prospects is the worst among the Baltic countries. The biggest inflationary pressure in the Baltic region is felt by Estonia, which has the weakest economic cycle”, says A. Izgorodins.
Lithuanians have reason for optimism
The majority of respondents in each of the Baltic states say that the still high interest rates on loans have not affected their finances. The largest share of those who think so is in Latvia (53%). There were 52 percent of such respondents in Lithuania, and 47 percent in Estonia.
“In Estonia, the smallest part of the population, whose interest rates have not been affected, but also the largest part of those whose finances from 2022 several times the European Central Bank (ECB) raised interest rates had a big impact – as much as 28 percent. In Lithuania, this number is 19 percent, in Latvia – 16 percent.
This is due to Estonia’s highest level of household indebtedness in the Baltic region. The ratio of household loan obligations to the gross domestic product in Estonia is 35%, while in Latvia it is only 17%, and in Lithuania – 22%”, comments Rūta Ežerskienė, member of the board of Citadele bank, responsible for retail banking in the Baltic countries.
It turns out that Lithuanian residents are the most optimistic about salary growth. 31 percent of the respondents believe that their salaries will increase in the next 12 months, while 28% in Latvia are convinced of this. population, and in Estonia – 23 percent. Even 8 percent surveyed Estonians believe that wages will decrease.
According to R. Ežerskienė, the optimism of Lithuanian residents regarding wages is influenced by the strengthening of the country’s economic cycle, especially in labor-intensive sectors – industry, retail trade and transport.
Plans include own housing and travel
Lithuanians can and want to afford more – exactly these conclusions are confirmed by the research conducted by “Citadele”.
The majority of Lithuanian respondents (47%) intending to spend money on major purchases in the next 12 months singled out plans for home repairs and new household appliances, as well as travel (32%).
“Almost a tenth (7%) of Lithuanian residents who participated in the survey intend to buy a home. It is likely that the recovering purchasing power and expectations regarding the further cutting of base interest rates in the euro zone may soon stir the activity of the Lithuanian real estate (NT) market.
In addition, the data of the Bank of Lithuania shows an interesting trend – it seems that we are finally seeing a break in the statistics of Lithuanian housing loans. Real new loans in the housing loan segment in 12 months. the moving average in May was the highest since 2023. December, and the annual rate of decline in new home loan volumes was the slowest since 2023. autumn Thus, even official data show that the peak of passivity in the Lithuanian housing loan market has passed, it seems that residents are more actively interested in real estate acquisition and are more actively borrowing for housing”, says R. Ežerskienė.
She emphasizes the trend that among the population who intend to increase their spending on large purchases, more than 75 percent. they intend to finance these expenses from their savings – even young people are planning this.
It is true that although most of them plan to buy large purchases from their savings, 58 percent surveyed Lithuanians could live without additional financial resources for only up to half a year. Longer than 6 months – 19 percent. Lithuanian. This is the largest part of the population in the Baltic countries – 15% could survive that long without additional financial sources. Estonian and Latvian.
The most gloomy forecasts are for restaurants
According to R. Ežerskienė, in the near future several consumer segments will begin to show signs of recovery more actively in the market. One such category is the home improvement goods and household appliances segment.
“In June, Lithuanian residents’ intentions to spend money on large purchases were the highest since 2021. December.
Lithuanian residents will more actively spend the additional money generated due to the decrease in interest rates on travel, home repairs and household appliances,” adds R. Ežerskienė.
At that time, A. Izgorodin says that the recovery of the population’s purchasing power has reached such a level that less attention is paid to the accumulation of savings. A part of the population intends to increase expenses for food purchases that are not the first necessity – for more expensive products they could do without. And such a recovery in consumption is very unusual.
“The recovery of food consumption is related not only to the recovery of the population’s purchasing power, but also to the recently sharply decreasing turnover of Lithuanian restaurants and cafes. The recovery of food consumption will kill the turnover of restaurants”, comments the economist.
The turnover of restaurants has already dropped by 11 percent during the year, and during all of 2024 decreased by 8.6 percent. According to A. Izgorodin, it is likely that the increased restaurant prices have a psychological effect on consumers and encourage them to reduce their spending in restaurants and cafes and to eat at home more often. That prices in restaurants could decrease – the economist is hesitant to share such forecasts.
“I would not quite agree that the increase in restaurant prices is related to the increase in value added tax. Salary growth has a significant impact. It is likely that the recovery of the Lithuanian economy will strengthen, we will see an increasingly acute shortage of workers – this will also affect the segment of restaurants and cafes.
Will there be more bankruptcies? Yes, there will be more bankruptcies. I think the risk zone is mid-range restaurants. There will be a “Hunger Games” period in the market, when those who are the strongest will survive”, A. Izgorodin shared his predictions.
2024-07-05 11:17:31