Before World War II, Lithuania was a typical agricultural country that exported flax, dairy products and timber. The industry was largely limited to textiles and foodstuffs, as the country, like Latvia, lacks industrial raw materials. Especially in the 1960s, the development of the industry was given priority. In the Soviet era, the Baltic economies were closely integrated into the Soviet economy, which led to major problems after independence.
Economic growth in Lithuania has been steadily high in recent years. The growth is largely due to increased demand in the domestic market, and in particular by the energy sector, construction, construction and trade.
The country has a shortage of qualified manpower, partly because of high emigration. According to official statistics, over 400,000 Lithuanians have left the country since independence in 1990, which is more than 10% of the total population.
Lithuania aimed to become a member of the Eurozone from 1 January 2007, but was not accepted because the inflation target was not reached. The new objective is to introduce Euro in 2010.
Agriculture and forestry
In 2008, 15% of employed persons in the primary industries worked, which constituted 5.3% of Lithuania’s GDP. Almost half of the country’s land is arable land, of which just over 20% is meadow and pasture and 16% productive forest. Agriculture was collectivized under Soviet rule, but a new law in 1989 prepared the transition to private agriculture. The main emphasis is on milk production and pig farming, but cereal cultivation (rye, wheat, oats) means relatively more now than before the Second World War. The Republic has a large surplus of dairy products and flax.
Forests cover almost 1/3 of the area; most of it is pine, with some oak and spruce.
Lithuania is relatively poor in mineral resources, but there are limited deposits of oil and natural gas. Lithuania relies heavily on importing oil, coal and natural gas, both for industrial production and for energy generation.
Lithuania previously had a nuclear power plant in Ignalina, which covered 70 percent of the country’s electricity consumption. Following pressure from the EU, the power plant has now been shut down for safety reasons. The country was previously a major exporter of electrical energy, but now more than half of the country’s electricity consumption is imported, mostly from Russia via Belarus. Plans for a new nuclear power plant have been put on hold as it requires cooperation with other Baltic states.
The energy supply is otherwise done at hydroelectric plants in the Nemunas watercourse, by peat extraction and by import of natural gas. The country was previously dependent on having to buy gas from Russia, but after a newly created LNG terminal came into operation in 2015, gas could also be imported from other countries, including Norway. Oil production started in 1990 from a small field at Kretinga.
Industrial raw materials, especially metals, from other parts of the Soviet Union have made it possible to build up a heavier mechanical and electrical engineering industry, shipbuilding and other industrial sectors. The industry’s share of GDP fell from 75% in 1991 to 33% in 1995. Later, the share of industry has remained at about this level, reflecting structural reforms after independence. The most important industrial sectors are food production, light industry, mechanical engineering and metalworking.
During the first half of the 1990s, most of Lithuania’s foreign trade with other former Soviet republics took place. Trade with Western countries has gradually increased. In 2004, Russia remained the most important trading partner in terms of imports, while Germany was the largest buyer for its exports. Other important trading partners are Belarus, Latvia, Ukraine and Poland.
According to Countryaah, main export goods are textiles, chemical products, fuels, machinery and metals. Import products are oil and gas products, machinery, chemicals and fertilizers.
Transport and Communications
Lithuania handles much of the transit trade between the Baltic Sea coast and Russia. In 2008, there were approx. 1800km of railway, 80,000km of roads and 600km of inland waterways. Vilnius has an international airport. Klaipeda is the largest port, Kaunas the foremost river port.