The Bank of Lithuania published the balance of payments for March 2022, which shows that: the deficit on the current account balance (CAB) in March was up by 2.6 times, compared to February, and amounted to €342.7 million. This was determined by a substantial increase in the foreign trade deficit, which resulted from larger increases in foreign trade imports than exports (30.0% and 26.8% respectively). With a substantial rise in exports and imports of services (by 28.1% and 44.2% respectively), the surplus of the balance of services increased moderately (by 1.8%) and amounted to €420.9 million. The deficit in the primary income grew by 17.8%, from €118.4 million to €139.4 million. The secondary income balance was in surplus and amounted to €27.3 million. Transfers from European Union (EU) support funds (€37.8 million) declined by 10.6%, whereas Lithuania’s calculated contributions to the EU budget (€29.9 million) contracted by 46.1%, compared to February. Personal transfers from abroad amounted to €49.7 million, a month-on-month increase of 7.8%. Personal transfers from Lithuania amounted to €34.7 million, a month-on-month decrease of 1.9%; the negative net flow of financial account investment (€851.9 million) mainly resulted from the negative net flow of other investments, which was not offset by the positive net flow of portfolio investment, direct investment and an increase in official reserve assets. As a reaction, important measures are being taken to strengthen capital markets.

In fact, the Bank of Lithuania announced the Capital Market Development Action Plan, the implementation of which is expected to bring important changes to the country’s financial system. The capital market would see significant growth and become more attractive to domestic and foreign investors, and alternative financing and investment options would be created for businesses and individuals. The measures implemented by 2025 are expected to expand the regulated market and the multilateral trading facility by a quarter, double the crowdfunding market, and increase the number of companies that issued bond issues by three quarters. As a result, the country’s businesses should have significantly more opportunities to attract the funding they need and at the same time expand and create jobs.

One of the first steps is to set up a Capital Market Council to supervise the implementation of the plan, as there is currently no institution in charge of the overall strategy for the development of Lithuania’s capital market. It would be made up of representatives of both public institutions and private sector associations. The plan foresees specific measures to improve the legal framework, including amendments to the Republic of Lithuania Law on Companies, the legalization of an investment account, and other proposals to encourage SMEs to raise funding by issuing securities, to extend the possibilities for pension funds to invest in a wider range of financial market instruments, a wider listing of state-owned companies to be traded on the stock exchange. It also provides a mechanism for innovative companies operating in the country to efficiently attract external financing on the capital market throughout their entire life cycle, i.e. from their start-up to sustainable development. It will also promote diversity of financial products traded on the Lithuanian capital market, innovative investment services, increase their accessibility and reduce the cost.

At the same time, the monetary financial institution (MFI) balance sheet and interest rate data for March 2022 show that loans granted by credit institutions to Lithuanian residents increased by €345.6 million, or 1.5%, over the month (their annual growth rate was 15.6%). Loans to Lithuanian non-financial corporations and households grew by €121.0 million and €101.2 million, or 1.3% and 0.8%, respectively over the month (their annual growth rate stood at 16.7% and 11.6% respectively). Loans to the financial sector increased by €133.2 million, while loans to the general government contracted by €9.8 million. At the end of March 2022, loans to these sectors amounted to €9.3 billion, €12.6 billion, €1.6 billion, and €339.7 million respectively. Loans for house purchasing granted by credit institutions to Lithuanian households increased by €128.5 million over the month, while loans for consumption and other purposes declined by €11.9 million and €15.3 million respectively, to €10.5 billion, €813.7 million, and €1.2 billion respectively.

Last year, consumer credit providers (non-credit institutions), including peer-to-peer lending platform operators, granted 235,000 new consumer credits. This is almost 16% less than in 2020 but the total amount of consumer credits increased by almost a quarter. This demonstrates the increasing amount of money borrowed by the population and the rapid growth in the average amount of credit, which stood at €2,048 in 2021, 46% higher year on year. The fact that the number of consumer credits granted is declining while the total amount borrowed is going up could be explained by the willingness of the population to borrow larger amounts and purchase more expensive items. On the other hand, rising wages are contributing to an increase in the ability to borrow such amounts.

In 2021, the share of overdue consumer credits went up slightly, both in the portfolios of peer-to-peer lending platforms and other consumer credit providers (non-credit institutions). This indicates that some residents who have taken out loans are still struggling to repay them on time. At the end of last year, around 7.7% of nearly 294,000 consumer credits were overdue by more than 90 days. The total outstanding amount (including late payment interest, penalties, and other amounts payable under the agreements) was €35 million at the end of 2021.