Sanctions work, though not on the Russians, only on us

It turns out that imposing economic sanctions on a large, rich and globally integrated country is like fishing for a giant whale with a small fish rod. Only those who sanction can suffer. Well, we suffered. Our prices have risen. Central banks, fighting those rising prices, are driving us into crisis. The only way to avoid serious political consequences is to lift the sanctions.

 

     "Economist A. Izgorodinas noticed that the data of the State Data Agency show that in January 2023 the volume of production of Lithuanian industry decreased at a similar pace as in December (-9.1% in December, -9.7% in January).

 

     "Here I would single out the furniture sector, where in 2023 in January during the year (compared to January 2022), production volumes decreased by 25 percent. Of course, the monthly production indicators have a tendency to jump, but it is still an indicator that shows the low demand for non-essential goods in the main export markets of Lithuania.

 

     Even more eloquent is the EC's monthly survey of EU companies. Seasonally adjusted EC data show that in 2023 in February, the opinion of Lithuanian industrial companies about the volume of orders was worse than during the peak of COVID-19, in addition, the same survey shows that Lithuanian industrial companies are increasingly producing products for storage - stocks of manufactured products are growing rapidly. This is also a good indicator of faltering demand," he wrote on Facebook.

 

     A. Izgorodinas added that since the Lithuanian industry exports most of its production, actual industry data and surveys of Lithuanian producers indicate a slowdown in consumption in the main Lithuanian export markets.

 

     "Assessing the surveys of Lithuanian industrial companies, I will not be surprised if in the near future the production trends in Lithuanian industry will deteriorate even more", he taught.

 

     The economist added that stubborn inflation in the US and the euro zone is also a cause for concern.

 

     "Recently published inflation indicators for the US and individual eurozone countries (France, Spain) show that inflation remains too high in both the US and the eurozone. US and European central banks are likely to continue to raise interest rates. 

 

The interest pause period moves from the spring to the second half of 2023 half a year Central banks basically have two options.

 

     Capitulate and admit that slowing down inflation to 2 percent. will fail or continue to raise interest rates aggressively, thus causing a deeper recession but slowing inflation rates.

 

     Personally, I think the second scenario is much more likely than the central banks capitulating.

 

     This means that we may have a more significant contraction of demand in the US and the Eurozone, with a corresponding impact on Lithuania's exporting sectors and, ultimately, on the domestic consumption market. We will see the impact of the aggressive monetary policy on the economies of the US and the Eurozone especially in the second half of this year", concluded A. Izgorodinas."