VILNIUS - The government has announced plans to inject around 2.3 billion litas (666.7 million euros) into the crisis-ridden construction and real estate sector, with a considerable part of the money expected to go toward renovating schools and kindergartens.
Gitanas Nauseda, SEB Bankas' chief financial analyst, said the figure would probably rise to around 4 billion litas. He told The Baltic Times that while this is a good plan, it could be too little, too late.
"It's absolutely necessary because the previous crisis plan is of course quite painful for sectors of Lithuanian business. We need compensation for those measures, and [compensation for] tax increases for small and medium businesses. This plan is good relief for Lithuanian businessmen and will give hope for the future," he said.
"I have some doubts about the timing of the package. Maybe it's a little bit too late. This money from the European Investment Bank (EIB) will only come in the middle of the year or at the end of 2009 's this is the best case. Maybe for some companies it will be too late," he said.
In the initial plans, the European Union and the EIB will finance around 1.8 billion litas worth of projects, with Lithuanian commercial banks expected to contribute the remaining 500 million litas.
Economy Minister Dainius Kreivys unveiled the bailout plan during a business forum on Jan. 29, but was unavailable for comment as TBT went to print.
Contrary to the original crisis plan, which stipulated the halt of all government building works, some of the money will be used to renovate old buildings to make them more energy-efficient and to simplify the regulation of construction and land issues.
Nauseda backed the government and dismissed claims that the stimulus package was aimed at improving disheveled schools. He said that it was a meaningful way to employ construction workers who have been hit during the crisis during a tough time.
"You should treat this as a support to the construction sector, not to the schools 's it is a very important sector 's nobody believes that the real estate sector will recover in 2009/2010. Now it's important that our construction sector remains [strong] for these two difficult years," he said.
The latest figures from the Lithuanian Statistics Department indicate that construction made up 10.23 percent of all of Lithuania's economic activity in 2007, making it one of the largest industries in the country.
Other experts are calling for more money for more people.
"This will probably allow the construction industry to survive. Together with this package should be an additional package for easing lending for private and corporate [projects] through commercial banks. Today even with the will to purchase living space, commercial banks make this financing almost impossible," Vytas Zabilius, the Ober-Haus General manager and president of Lithuanian Real Estate Agencies Association, told The Baltic Times.
Presently the package will only benefit the construction sector for government projects 's something that Zabilius thinks should be amended to include property developers.
"It will not help directly for developers, but developers also probably will shift into the renovation sector. For developers, it would help to have easier lending for private buyers and more positive news about the economic situation in Lithuania 's I think the government should return the residential purchasing interest rate compensation for brand new [properties]."
"[There should also be] stimulus for modernization and reconstruction. I would vote for the easing of lending and a purchasing motivational scheme for new or renovated units 's warm units 's as well as for an additional motivational system to continue constructing new houses and apartments [along] with the presented renovation package," he said.
Nauseda said he thought that the limitations on money from the EIB might make it unattractive to businessmen.
"In the normal case businessmen are interested in getting credit. If the interest rate would be lower, they would prefer this to money to EIB 's there will be higher requirements and limitations. Maybe they can use it in theory, but not in reality because of the limits," he said.
Many of those who have lost their jobs in the financial crisis have been unskilled workers from the construction sector.
As of Jan. 30, the Labor Exchange, the body responsible for finding jobs for people, reported that 149,000 people, or 5.7 percent of the population, were registered as job seekers.
