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ECONOMY
in Lithuania Latest Update: 8/11/04 |
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Until 1950 Lithuania
was a largely rural country with an agriculture based economy. In 1950 the USSR imposed communist regime embarked on rapid forced
collectivization of family farms leading to urbanization and
industrialization of the country. In
1939 only 22.9% of the total population lived in an urban environment. By 1992 urban population grew to 68.5% and
manufacture accounted for almost 35% of Gross Domestic Product.
The breakup of the Soviet Union and the resulting economic woes of
the newly independent countries and Russia itself had enormous impact on
Lithuanian economy, especially the industrial sector.
These countries had been the primary markets for Lithuania’s
industrial products. The
reduced demand in these markets resulted in large overcapacities in
industrial production facilities. Inability,
due to many cultural, political, financial and social factors, to quickly downsize and adjust production
quantities and quality to the new market demands resulted in
exponential growth in producers costs leading to inability to compete,
even within the domestic market, with the
imports from the West.
Financial losses multiplied resulting in mass bankruptcies.
By 1997
manufacturing accounted for only 24.1% of Gross Domestic
Product. The agricultural sector was also substantially affected by the political change. Rapid dismemberment of the collective and state farms resulted in the destruction of much of the agricultural infrastructure, such as crop storage, drying and other facilities, and, most importantly, dispersement of agricultural machinery. Return of land to previous owners, many of them urban dwellers, resulted in greatly reducing the area under cultivation. The privatization also resulted in much of agricultural land being partitioned into small inefficient high cost units. Currently 85.1% of the nation's farms, comprising 58.6% of the total agricultural land are less than 20 hectares (49.4 acres) in size. The agriculture’s (including forestry) share of the Gross Domestic Product dropped from 14.2% in 1993 to 10.6% in 1994. For a while it appeared that the agricultural sector was on the way to recovery with its share of GDP climbing back to 12.6% in1997. However, with productions costs continuing to rise and prices for agricultural products remaining steady and even dropping, agriculture again went into downward slide. In year 2000 agriculture accounted for only 9.9% of GDP. People started moving back to the cities. Since 1996 the rural population dropped by about 17,000 and the population living in urban areas is back and remains steady over 68%. Census conducted early in 2001 discovered that the population estimates based on previous Census was overstating the population count by about 200,000. It is believed that this discrepancy is largely due to the "illegal" emigration during the past 3-4 years. |
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Economic
Indexes: Updated: 7/11/05 |
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