Over the 2010-2020 period, Lithuania’s GDP grew by 39.9%, totalling EUR 43.4 billion in 2020. However, the GDP declined by 0.1% in 2020 over the previous year. In 2021, Lithuania’s GDP and inflation is expected to grow by 5.0% and 3.8%, respectively, as compared to the 2020 level .
In 2020, the country’s economic growth contracted mainly due to the COVID-19 pandemic and subsequent lockdown measures undertaken by the government in the second half of the year.
The number of enterprises in the broad construction sector in Lithuania increased by 172.2% over the 2010-2020 period, totalling 66,728 in 2020. This was mainly due to growth in the number of enterprises in the narrow construction (+203.0%), the real estate activities (+192.6%), the architectural and engineering activities (+125.8%) and manufacturing (+42.1%) sub‑sectors over the same period.
Similarly, the volume index of production in the broad construction sector recorded an increase of 19.7% during 2015-2020, mainly driven by a 16.4% increment in the construction of buildings, and a 23.7% growth in the construction of civil engineering. Conversely, this represented a 1.9% decline in volume index of production in the broad construction sector as compared to 2019 levels, primarily due to a 6.6% decrease in the construction of buildings offsetting a 3.9% increase in the construction of civil engineering.
Correspondingly, total turnover of the broad construction sector increased by 119.2% between 2010 and 2018, reaching EUR 10.2 billion. It further increased to EUR 11.1 billion in 2020, representing a 139.1% increase during 2010-2020. The growth in the sector was mainly driven by the manufacturing and narrow construction sub sectors which registered an increase in turnover of 142.7% and 142.4%, respectively, between 2010 and 2020.
Similarly, the gross operating rate in the broad construction sector, used to determine the sector’s profitability, stood at 16.3% in 2018, 5.9 percentage points (pps) higher than the 2010 level (10.4%) and below the EU‑27 average (16.7%). As for the individual sub-sectors in 2018, the real estate activities sub‑sector remained the most profitable (with a 46.1% gross operating rate), followed by the architectural and engineering activities (16.2%), the narrow construction (8.8%) and the manufacturing (8.7%) sub‑sectors.
In 2020, there were 195,047 persons employed in the Lithuanian broad construction sector, marking a 49.6% growth from the 2010 level (130,379 persons). This was driven by growth in the real estate activities sub‑sector (+66.7%) over the same period. The narrow construction sub‑sector came next with an increase of 50.3%, followed by the manufacturing (+39.6%) and architectural and engineering activities (+34.5%) sub‑sectors over the 2010‑2020 period.
With regards to market developments, the Lithuanian housing market is an important pillar for the broad construction sector.
Under its Long-Term Renovation Strategy, Lithuania has set a target of renovating 74.0% of its buildings stock (nearly 440,000 buildings) by 2050, aiming to generate its primary energy without using fossil fuels.
In addition, Lithuania has made it mandatory for companies to reuse, recycle and recover at least 70.0% (by weight) of the non-hazardous construction and demolition waste generated on the construction sites. Moreover, all new constructions need to comply with all the EU legislation requirements of ensuring no harm to climate change mitigation. Furthermore, all new constructions need to meet the requirements of Near Zero Energy Buildings (NZEB).
With regards to the Lithuanian non‑residential construction and civil engineering activities, the country is primarily focused on upgrading its road and rail connectivity. With regards to railways, completion of the cross border Rail Baltica project in cooperation with Poland and other Baltic countries remains paramount. In September 2020, the Lithuanian Ministry of Transport together with LTG Infra, and Ardanuy Ingenieria signed a EUR 1.1 million contract for developing the Kaunas rail node infrastructure plans as part of the EUR 5.8 billion Rail Baltica project. Project design and construction is expected to be completed by the end of 2026. In relation to roadways, the Via Baltica highway, running from Warsaw to Tallinn and connecting Prague to Helsinki, is currently being upgraded. Another notable project is the A14 Highway Improvement project.
As per its National Recovery and Resilience Plan (NRRP), Lithuania has allocated EUR 341.0 million for phasing out the polluting road transport vehicles (private, public and commercial) and increasing the share of renewable energy sources in the transport sector, thereby reducing greenhouse gases emissions.
Despite these positive developments, the Lithuanian construction sector faces two major challenges. Firstly, the shortage of skilled workers in the Lithuanian construction sector continues to be a major concern. This is mainly due to emigration and an ageing workforce. Secondly, the construction sector continues to suffer from late payment issues. As per the European Payment report 2021, nearly 42.0% of Lithuanian businesses believe the widening gap between payment terms and duration of payment generates risks for the sustainable growth of businesses.
Overall, the Lithuanian construction sector has a positive outlook. Non-residential and civil engineering market are expected to be the primary growth drivers. Investment in public sector infrastructure, digitalisation as well as a circular economy, backed by EU funding, is expected to lead the future growth of the sector.