The balance of payments for November 2021 published by the Bank of Lithuania shows that, although the surplus on the current account balance (CAB) significantly contracted (3.3 times), the CAB remained in surplus and amounted to €106.0 million. The contraction was determined by the primary income balance deficit and the decreasing surplus balance. With the rise in imports of services (0.6%) and the decline in exports of services (1.9%), the surplus balance of services diminished (5.7%), amounting to €378.6 million. The exports of goods rose more rapidly than imports (6.7% and 5.6% respectively), thus decreasing the foreign trade deficit to €243.4 million. The negative primary income balance formed due to the specially reduced flow of European Union (ES) subsidies to Lithuania. However, reinvestments keep up.
The secondary income balance remained in surplus, amounting to €46.8 million. Transfers from EU support funds (€46.8 million) went up by 3.3%, whereas Lithuania’s calculated contributions to the EU budget (€40.1 million) fell by 9.9% compared to October. Personal transfers from abroad amounted to €55.2 million, a month-on-month increase of 6.0%. Personal transfers from Lithuania totaled €19.7 million, rising 4.3% month on month. The negative net flow of financial account investment (€416.3 million) resulted from the negative net direct investment flow.
In Q3, the CAB declined 7.9 times and amounted to €18.9 million or 0.1% of the gross domestic product (GDP). This was determined by a contraction in foreign trade and primary income balance deficits, which were not offset by surplus balances of services and secondary income. Due to faster growth of the exports of goods (9.3%), compared to that of their imports (7.1%), the foreign trade balance deficit decreased and stood at €793.3 million. The primary income balance deficit contracted due to a decline in the direct investment income balance. A year earlier, the CAB was in surplus, at €957.7 million, equating to 7.2% of GDP.
The capital account surplus contracted 6.3%, compared to the previous quarter, and amounted to €166.1 million. This was a result of lower transfers received from the European Union structural support funds dedicated to financing investment projects. The positive net flow of financial account investment increased 2.4 times over the reporting period and totaled €708.1 million or 4.7% of GDP. This was determined by the positive net flow of other investments and an increase in official reserve assets, which were not offset by the negative net flows of portfolio investment and direct investment. The negative net international investment position amounted to €5.2 billion or 9.7% of GDP at the end of Q3. Lithuania’s gross external debt stood at €38.6 billion (72.2% of GDP) at the end of Q3, while net external debt was negative and amounted to €2.2 billion or 4.2% of GDP.
In the same period of time, according to the latest data released by the Bank of Lithuania and Statistics Lithuania, the flow of foreign direct investment (FDI) in Lithuania was positive and amounted to €146.5 million. The growth of reinvestment (€526.5 million) offset the decline in debt securities (€330.5 million) and equity (€49.5 million). In the period under review, the growth was observed in investment by Polish (€192.5 million), Hong Kong (€103.6 million), Dutch (€61.8 million), and Estonian (€57.6 million) capital companies, while the largest decline was recorded for Luxembourg (-€408.5 million) capital companies. In terms of economic activities, the highest increase was observed in investment in companies engaged in wholesale and retail trade as well as repair of motor vehicles and motorcycles (€177.1 million). The flow of FDI also increased in financial and insurance companies (€72.8 million), whereas investment in information and communication activities shrank (-€115.2 million).
FDI income from non-resident investment amounted to €593 million in Q3 2021 and was 7.4% higher year on year. Reinvestments accounted for the largest share of income (€526.5 million). Most income from FDI was earned by Swedish (€127 million), Hong Kong (€105.2 million), and Swiss (€72.6 million) investors.
Cumulative FDI in Lithuania rose by 4.1% over the year and amounted to €24,8 billion or 46.4% of GDP on 30 September 2021. FDI per capita amounted to €8,927 on average (€8,519 on 30 September 2020). Germany (€5.6 billion), Sweden (€3.9 billion), Estonia (€2.9 billion), the Netherlands (€2.2 billion) and Hong Kong (€1.4 billion) were among the five largest investors. The largest share of FDI was attracted by companies engaged in financial and insurance activities (€9.6 billion), manufacturing (€3.5 billion), wholesale and retail trade as well as repair of motor vehicles and motorcycles (€2.7 billion) and real estate transactions (€2.4 billion).
FDI income earned by Lithuanian investors abroad amounted to €55.5 million during the period under review. Reinvestments accounted for the largest share of income (€47.6 million). The largest share of income was earned from investment in Latvia (€44.9 million). In terms of activity, the largest income came from enterprises operating in wholesale and retail trade as well as repair of motor vehicles and motorcycles (€33.6 million). Lithuania’s cumulative DI abroad grew by 4.4% over the year and stood at €9 billion on 30 September 2021. Lithuania’s DI in the EU Member States accounted for 50.6%, DI in euro area countries comprised 43.7%, whereas in the US stood at 43.6% of Lithuania’s total DI abroad. The largest share of Lithuania’s cumulative DI abroad (€4.9 billion) went to companies engaged in professional, scientific, and technical activities.