VILNIUS – People in Lithuania have more money than the government says they do, and many are making it in ways invisible to the government's eyes.
The Lithuanian Free Market Institute's semi-annual survey of macroeconomic variables maintains that monthly household income per household member is 821 litas ($205.25) in cities, 582 litas in towns, and 380 litas in rural areas. Official estimates put those figures at 483 litas, 365 litas, and 252 litas respectively.
One of the more important aspects of the survey is that it, unlike government statistical efforts, can estimate the size of Lithuania's bustling "shadow economy." These businesses - legal or illegal - do not report earnings to tax officials. In Lithuania, the LFMI survey said, the "shadow economy" composed 24 percent of the country's GDP.
One reason for this large "shadow economy", the study's authors Guoda Steponaviciene and Ramunas Vilpisauskas told TBT, was the excessive regulation of the Lithuanian economy. If the markets in Lithuania were less-regulated, they explained, there would be no need for people to have "shadow" businesses.
Related to overregulation was a fall in profit margins from 8.6 to 8 percent in 1999. "That means it's getting harder and harder to do business," Steponaviciene said.
As usual, some of the LFMI's figures differed greatly from the government's. The institute says 1998 unemployment was at 10.5 percent, while according to official statistics, courtesy of the Lithuanian Labor Exchange, it was 6.4 percent. The LFMI says inflation averaged 5.5 percent in 1998 while official statistics say it was 2.4 percent. For 1999, the forecast is 6.5 percent while officially it is 4 percent.
The institute's survey avoids traditional statistical methods, instead compiling estimates from 46 market participants.
"The survey is based on the paradigm of national expectations. Experts are asked to estimate some economic variables, basing their estimations and forecasts on all information available to them," said Steponaviciene.
"We don't ask how much you pay your workers, nor what is your average salary. We want to get already-aggregated figures," she added.
This survey's measure of GDP growth is closest to the government's statistics. "And the government changed it's estimations, downward, until it reached 5.1 percent," Vilpisauskas said. "These alterations were made taking into account the effects of the Russian crisis."
Steponaviciene and Vilpisauskas believe that their survey allows for quicker market reaction time to changing economic conditions.
"For one thing," they wrote, "the research suggests that the experts polled are quite accurate in assessing ongoing economic processes. Given that they tend to detect the signs of economic changes and trends in the internal and external economic environment faster than the government, market experts are able to predict them much in advance."
The best example of this agility was the Russian crisis. The LFMI admitted that this year's survey showed a narrowing of differences on its estimates of 1998 GDP growth - 4.9 percent, compared with the government's figure of 5.1 percent. This happened, the institute says, because the Department of Statistics had revised its GDP estimates several times in a downward trend to reflect the economic impact of the Russian crisis.
The LFMI's unemployment figure, 10.5 percent, is considerably higher than the government's 6.1 percent.
"It is quite consistent with the earlier survey," said Vilpisauskas. "The Department of Statistics doesn't dispute this unemployment figure."
Overall, the institute feels it is generally more optimistic than the Department of Statistics.
"In general we think people are richer," said Vilpisauskas. "Not all economic activity is recorded by statistics."
The biggest challenge to the Lithuanian economy is the Russian crisis, but even that might not have such a debilitating effect.
"The question is how big and how long will this impact be felt. And in the case of our survey, experts suppose that this impact will not last long. The market participants are more optimistic about GDP and more pessimistic about profit margins," said Steponaviciene.
