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Basis for fast economic growth in Lithuania - One of the lowest corporate tax rates in the EU
Gross Domestic Product As regards the economy, it is easy to get buried in a sea of figures and irrelevant facts. Stand-alone uncommented figures might as well be misleading. Though GDP per capita was 60 % of the EU average in 2007, fast rate of economic growth (Lithuania has demonstrated an annual 8 % growth for the last six years) ensures that Lithuania steadfastly heads towards the average of the older EU countries. We, just like the rest of the world, must face current and emerging global challenges, but the foundations laid ensure that Lithuania’s economy is prepared for a normal cyclic slowdown, while retaining macroeconomic balance
Taxes As of 2002, the standard corporate tax rate in Lithuania is 20%, 13% for small corporations. Corporate taxes rates are among the lowest in the EU. Increased attention to the investment generating high added value has resulted in a marked tax incentive for R&D companies as of 2008. The pro-business government has been implementing sweeping labour taxation reforms, e.g. the personal income tax has come down from 24 % to 15% in 2009.
Key trading partners In 2007, Lithuania’s key trading partners were the EU-25, accounting for 64.8 % of Lithuania’s total exports and 68.3 % of total imports. In 2007, Lithuania’s foreign trade turnover amounted to EUR 30.3 billion, with exports accounting for EUR 12.5 billion, and imports for EUR 17.8 billion. Compared with 2006, Lithuanian export and import grew by 11.1 % and 15.4 % respectively. Lithuania’s key export partners were Russia, Latvia, Germany, Poland, Estonia, the United Kingdom and Denmark. Major import partners were Russia, Germany, Poland, Latvia, the Netherlands, Italy and Sweden.
Modern infrastructure: an essential building block Large market proximity and accessibility, well-performing logistics, and well-built infrastructure give a finer edge to Lithuania. Lithuania is between the huge markets in the East (Russia and CIS countries with a population of 250 million), and the West (with a population of over 340 million.). Four international airports, an ice-free seaport and two international transport routes (the North-South route and railway connecting Scandinavia with Central Europe, and the East-West route linking Eastern markets with the rest of Europe) have turned Lithuania into an important centre of international transport. The transport and warehousing share in the GDP is above 13 %. The estimates show that each Litas invested in the sector brings double return in five years time. Lithuanian transport constitutes a very important part of the transport system of the southern region of the Baltic Sea, offering high quality services both for Lithuania as well as its partners in the East and in the West.
Liberal reform-leading roads For Lithuania, just like for many other Central European countries, the year 2004 was a breakthrough year, serving as a baseline for the future. Consistent work, legal and economic reforms and negotiations have resulted in the membership of the EU and NATO. Lithuanian economic success has been built on liberal foreign trade regime, price liberalization, efficient privatization and stable currency. It was these factors that helped Lithuania to more rapidly pick up the pieces of the economic blockade of 1990s and overcome the subsequent economic recession. The road of reforms was far from easy, as Lithuania had to switch over from planned to market economy, at the same time trying to deal with ruthless consequences of the Soviet economic blockade. In this context, Lithuania’s achievements look even more impressive.
Knowledge economy Over the last decade, the Lithuanian economy has taken a huge leap from an agrarian and traditional industrial economy towards the economy based on high technologies and international services. According to the study of the KPMG, a global business consultant providing audit, tax and advisory services, Lithuanian producers are the most profitable among the Baltic States and exceed the average profitability of producers in the Central Europe. The study reveals that Lithuanians are the most active entering new markets. In the first quarter of 2008, the services sector accounted for 62 %, production and construction for 30.6 % and agriculture for 7.4 % of total employment in Lithuania. The sectors of services, production and construction were provided with stimuli enabling them to develop. This rate of development would have been hardly possible without new technologies. According to the Department of Statistics of the Republic of Lithuania, the 2007 returns generated by real estate sector was 40% up on previous year, IT showed 18% increase, construction, transport and stocking sectors showed about 10 % increase in profits compared to previous year. In 2006, companies generated 26 % more revenues, while operational profitability went up by 50 %.
- Lithuania is often singled out among Central and Eastern European countries as a leader in the field of biotechnology. - Lithuanian laser companies supply over half of the world market with high-energy picosecond lasers. - Lithuanians lead global production in ultra-fast parametric light generators. - Lithuanian metal processing and automotive companies are suppliers for Volvo, SAAB, Renault and other world-known companies demanding top and timely value. - Lithuania’s export-oriented plastics industry is emerging as the leader in the region. - The textile and clothing sector is one of the most important industries in Lithuania. It accounts for 20 % of employment in the manufacturing sector and contributes with nearly 10 % share to the GDP. The sector has been gaining an increasing attention from foreign investors.
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