In the absence of a strong parliamentary mandate, we caution that growing disillusionment with the political process in the country continues to threaten investor confidence in the construction and infrastructure sector. The construction industry value is expected to reach US$2.6bn in 2013 based on year on year (y-o-y) growth of 3.5%. This level of growth is expected to persist over the forecast period with average y-o-y growth of 3.9% until 2021, when the industry value will reach US$4.3bn
The key projects and developments are:
- The government of Lithuania sanctioned laws to reduce the country’s reliance on energy imports from Russia. The plans include the construction of a nuclear power plant, a liquefied natural gas terminal and new transmission lines to Sweden and Poland. The new lines will enable the establishment of power grid synchronisation between Lithuania and the western region of Europe. The nuclear plant is planned to be constructed by the government in partnership with Hitachi-GE Nuclear Energy, with the plant expected to be equipped with a 1,350MW advanced boiling water reactor.
- The European Commission (EC) green-lighted Lithuania’s 1,340MW Visaginas nuclear power plant (NPP) on June 8 2012. The favourable opinion enables nuclear power projects to apply for EU financing. However, the commission stressed that the plant is required to remain economically viable. The commission also clarified that it is unlikely to financially support the production of nuclear energy in Lithuania or elsewhere in the EU. The plant carries a price tag of around EUR5bn (US$6.32bn). Construction work is to begin in 2015, with the plant to start commercial operations in 2020-22.
- AAA Intermodal introduced a new weekly rail freight service between Lithuania’s Port of Klaipeda and Moscow. The intermodal container rail service, which has a transportation capacity of 114 twenty-foot equivalent units (TEUs), was launched in cooperation with rail companies in Lithuania, Belarus and Russia. We continue to see signs of a slowdown in economic activity over the coming quarters, which we expect to persist into 2013. However, a slight adjustment to our net export forecasts has seen our real GDP growth forecast for 2012 move up from 1.9% to 2.3%. While Lithuania’s long-term political outlook remains among the most stable in the emerging Europe region, we nevertheless caution that the country’s convergence with Western political and economic institutions through 2021 is by no means assured. Dealing with an economy which is set to post significantly lower trend growth over the long term (compared to pre-crisis levels), while balancing the need to pursue a more pragmatic foreign policy with Russia and the demands of an increasingly nationalist electorate, will pose significant challenges for Lithuanian governments to 2021.