Economic Outlook of Lithuania Essay

2084 Words Mar 23rd, 2011 9 Pages
Master of Science in International Business MANAGERIAL ECONOMICS


abu dhabi, 2010
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1. Monetary policy in Lithuania 4 2. Key reasons of monetary policy 4 3. Enacting the monetary policy 5 4. Impact of economic
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As the country is heavily reliant on foreign trade, the dropping demand resulted in reduction of the exports by 31% while the imports fell by larger 44% year over year for the fir the nine months ended in September, 2009 (Government Statistics, 2010). This indicates that the demand and supply of the items were impacted drastically by Lithuania due to 2010. Lithuanian exports are primarily industrial in nature (laser diodes etc) and as the industrial production in Europe fell, the demand also fell, reducing the export supplies. Due to the contracting disposable income of the citizens, the demand for imports fell too.

5. Impact on business cost structures

The cost structures in most of the high tech industries remain primarily fixed as they require heavy investments on R&D etc. Thus, the reduction of the demand from the Europe has resulted in a heavy blow on the Lithuanian industries. While the impact of maintained monetary policy was more stabilizing on these companies, due to lower demand for their products, the companies were suffering largely.

While some of the industrial manufacturers went bankrupt as they failed to maintain the demand for the products at a level which they can survive, other companies had to reduce costs in line with most of the other companies in Europe and North America. They were compelled to reduce less profitable operations, contain capital expenditure to only most necessary and reduce

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