Robertas DargisPresident of the Lithuanian Confederation of Industrialists

2017 06 15

Lithuania: in a wind of change

Lithuanian Confederation of Industrialists -the largest business organisation in Lithuania

2

~3000 Members

Sectoralassociations

50

7Regional

associations

Source: Lithuanian Confederation of Industrialists

31Individualmember

64% of Lithuania’s economy is created by sectors represented by LPK

63,6%36,4%

Sectors represented by us

Other sectors

GROSS VALUE ADDED IN 2015

GROSS VALUE ADDED BY SECTORS REPRESENTED BY LITHUANIAN CONFEDERATION OF INDUSTRIALISTS | PCT.

JOBS CREATED IN 2015• Manufacturing

• Transportation and Storage

• Construction

• Financial and Insurance activities

• Accommodation

• Other sectors

> 19 bln. Eur

> 550thousand

jobs

EXPORT SHARE IN GDP, 2015

79%(22,6 bln. Eur)

Source: Lithuanian Confederation of Industrialists and Lithuanian Department of Statistics3

In 2016 Lithuania showed a modest economic growth

4Source: Eurostat 2017

2,3%2,0% 1,9%

1,6%

0%

1%

2%

3%

4%

5%

6%

Irel

and

Mal

ta

Ro

man

ia

Luxe

mb

ou

rg

Bu

lgar

ia

Slo

vaki

a

Spai

n

Swed

en

Cro

atia

Cyp

rus

Po

lan

d

Slo

ven

ia

Cze

ch R

epu

blic

Lith

uan

ia

Net

her

lan

ds

Latv

ia

Hu

nga

ry

EU (

28

co

un

trie

s)

Ger

man

y

Un

ited

Kin

gdo

m

Esto

nia

Au

stri

a

Po

rtu

gal

Fin

lan

d

Den

mar

k

Be

lgiu

m

Fran

ce

Ital

y

Gre

ece

REAL GDP GROWTH IN EUROPEAN COUNTRIES (2016) | PCT. CHANGE

In the I-st quarter of 2017 Lithuania’s economy starts to pick up

5

1,6%

6,0%

3,8%3,5% 3,5%

1,8%2,3%

4,1%

2010 2011 2012 2013 2014 2015 2016 20171Q

LITHUANIA‘S REAL GDP GROWTH | PCT.

1,8%

4,1%

2016 1Q 2017 1Q

LITHUANIA‘S REAL GDP GROWTH 1Q | PCT.

Source: Lithuanian Department of Statistics 2017

*Real GDP growth compared to corresponding period of previous year (seasonally and working day adjusted)

22 % of all gross value added in Lithuania is created by Industry

6 931

7 493 7 4497 630 7 580 7 668

2011 2012 2013 2014 2015 2016

GROSS VALUE ADDED CREATED BY INDUSTRY | MILLION EUR

+2,3%

222,6

230,3 230,5

226,6229,6

238,5

2011 2012 2013 2014 2015 2016

EMPLOYMENT IN INDUSTRY | THOUSAND PERSONS

+3,5%

Source: Lithuanian Department of Statistics 20176

Industrial production capacity utilization is high

3 006,7

3 140,8

3 416,9

2015 1Q 2016 1Q 2017 1Q

INDUSTRIAL PRODUCTION (VAT AND EXCISES EXCLUDED)* | MILLION EUR

75,8%75,6%

75,6%

76,6%

76,1%76,3%

77,1%

INDUSTRIAL PRODUCTION CAPACITY UTILIZATION LEVEL | PCT.

Source: Lithuanian Department of Statistics 2017

*Manufacturing excluded refined petroleum products (constant 2010 prices)

7

Despite that Russia remains our top export destination, only 9% of exported goods are of Lithuanian origin

Export of goods of Lithuanian origin Re-export

Source: Lithuanian Department of Statistics 2016

TOP 10 DESTINATIONS OF LITHUANIAN GOODS EXPORT IN 2016 | MILLION EUR

3 049,1

2 228,62 051,5

708,4871,8 962,3 1 075,5 1 168,1 1 199,4

1 737,8

8

In 2016 Lithuanian producers entered new markets in Asia and USA

0,9% 7,2%

-13,2% -9,3% -19,8%

23,7% 23,6%

73,8%

178,0%

EU Asia CIS Russia Ukraine USA China India Japan

Source: Lithuanian Department of Statistics 2016

EXPORTS OF GOODS* (EXLUDING MINERAL FUELS) GROWTH IN 2016 | PCT.

9

*Exports of goods of Lithuanian origin CIS – Commonwealth of Independent States

TOP 10 goods exported by Lithuania’s producers

LITHUANIAN GOODS EXPORT STRUCTURE 2016 | PCT.

14%

8%

8%

7%

6%4%4%3%3%

43%

Mineral fuels

Machinery and mechanical appliances

Furniture

Electrical machinery equipment and parts

Plastics and articles thereof

Vehicles, parts and accessories

Wood and articles of wood

Pharmaceutical products

Fertilizers

Others

Source: Lithuanian Department of Statistics 201610

In the I st. quarter of 2017 goods export to the United Kingdom decreased by 11%

22%19%

10%8%

16%

26%

34%

-11%

33%

5%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

LITHUANIA’S GOODS EXPORT 2017 1 QUARTER COMPARED TO THE PREVIOUS YEAR | PCT.

Source: Lithuanian Department of Statistics 201711

210,5 188,3

44,239,4

2016 1Q 2017 1Q

Re-export

Export of goods of Lithuanian origin

Decline of goods export to United Kingdom was mainly influenced by the decrease of GBP value

GOODS EXPORT TO UNITED KINGDOM | MILLION EUR

254,7227,6

-10,6%

1

1,05

1,1

1,15

1,2

1,25

1,3

1,35

1,4

1,45

1,5

-10%

GBP / EUR EXCHANGE RATE

2015 2016 20172016-06-23

Source: Lithuanian Department of Statistics 201712

LPK “Brexit” working group

Effect evaluation

Recommendations for negotiations

Wood

Furniture

PlasticsPharmaceuticals

Textile

Prepared foodstuffs

Brexit WG

Source: Lithuanian Confederation of Industrialists

Qualitative and quantitative surveys and further assessment of export trends

13

Global Competitiveness Index (Lithuania’s rank)

14Source: The Global Competitiveness Index 2016-2017

RANK 2015 2016

15

Global competitiveness index

Ease of access to loans

Effect of taxation on incentives to invest

Business impact of rules on FDI

No. of procedures to start a business

Hiring and firing practices

Redundancy costs weeks of salary

Burden of government regulation

Wastefulness of government spending

Availability of latest technologies

Quality of overall infrastructure

Quality of the education system

Venture capital availability

University-industry collaboration in R&D

Time to start a business days

36 35

91 53

83 68

81 66

9 3

120 116

109 105

103 92

92 89

31 28

30 28

53 57

48 51

27 34

9 13

- Lithuania’s ranking decreased in 2016

Global Competitiveness Index (Lithuania’s rank) (II)

Source: The Global Competitiveness Index 2016-2017

Technological readiness

Higher education and training

Labor market efficiency

Foreign relations

Healthcare

Financial market development

23,3%

20,0%

17,5%

16,7%

13,3%

9,2%

WHAT SHOULD BE THE PRIORITIES OF THE GOVERNMENT?

Higher education reform – the most importantjob for the government

Source: Lithuanian Confederation of Industrialists16

LPK is actively preparing recommendations to the Government

LPK tries to create the most favorable conditions for economic, technical and social progress:

• Autumn 2016 – meetings with political parties

• November 2016 – Recommendations for the Programme of the Government (2016–2020)

• January 2017 meetings with newly appointed ministers of Lithuania

• Recommendations for Implementation plan of the Programme of the Government

• LPK and Lithuanian Government meeting (April 2017)

Source: Lithuanian Confederation of Industrialists17

www.lpk.lt