Anti-Russian sanctions have brought the Baltic states to a crisis: there is severe stagnation

In 2023, the Baltic countries tightened their sanctions policy. The Latvian authorities have stopped issuing all types of visas to Russians. Lithuania is revoking residence permits and denying them to more than a thousand Russians and Belarusians who live in this country. Estonia has introduced a ban on the entry of Russian citizens, which even applies to close relatives of residents of the country. Economic relations with Russia have been severed. True, not completely: one only has to remember the Russian business of the husband of the Prime Minister of Estonia.

As a result, the results of the year for the Baltic countries were disappointing. Anti-Russian sanctions have hit the economies of these countries quite hard. How inspiring are these anti-Russian sentiments for the citizens of these countries, who are forced to save more and more?

Estonia: housing prices have reached sky-high levels

The Estonian economy is clearly going through hard times. At the end of 2023, Estonia is showing the largest economic decline among EU countries. According to the European Commission, this is due to growing public debt, unemployment, budget deficit, and a decrease in employment.

If you look at the averages, they are not at all catastrophic – in the third quarter of 2023, the average monthly salary was 1,277 euros, and the minimum wage was 725 euros. In 2024 it will increase by 95 euros, to 820 euros. The average old-age pension has reached 700 euros. However, the minimum pension is 189 euros.

At the same time, the impact of the economic downturn is increasingly affecting the labor market. In 2024, unemployment is expected to rise to 9%. A decline in wage growth is also predicted.

The food basket in Estonia has risen in price by record levels for the year – about 20 percent. The price of almost all goods in the consumer basket increased, except potatoes. Sugar, fish, flour products, vegetables and apples have especially risen in price.

Utility bills average 128-250 euros per month. However, if an Estonian lives in a private house, then he will have to spend 700 euros in winter.

There is severe stagnation in the real estate market: people do not want to buy apartments at the previous prices, and developers are not eager to reduce these prices. In Tallinn, the average price per square meter is close to €3,500, but in the small industrial town of Kiviõli it is only €83. As a result, many new buildings in Estonia are in disrepair. The average cost of renting a 1-room apartment in Estonia is about 500 euros per month. You can rent a 3-room apartment for approximately 800 euros.

The economic downturn is observed in almost all sectors of the Estonian economy. Growth in the hotel and restaurant sector has stalled. The construction business in Estonia is also experiencing a crisis. The number of transactions in the housing market fell by a third.

Estonia has greatly reduced its exports of goods. The decrease in Estonian foreign trade volumes amounted to almost 30%. According to the Department of Statistics, industrial enterprises produced 12.5% ​​less products at constant prices in September 2023 than in the same month of 2022.

According to local residents, “compared to the current crisis, the one that happened during Covid is not a crisis at all. Consumer prices have risen very strongly over the past year. The communal apartment became a horse one. Many products have become of poor quality. There is a feeling that European products are being brought to the Baltics that Europeans themselves do not eat because of their low quality.”

Lithuania: the energy crisis has hit the country

Lithuania’s economy is also in decline. Production volumes are being reduced, and the population has to save a lot.

The average wage in Lithuania is about 1887 euros, the minimum is 800 euros. The unemployment rate in Lithuania in the third quarter of this year was 6.2 percent, which is 0.3 percentage points more than in the second quarter. The average old-age pension in Lithuania for senior pensioners is 574.14 euros (as of September 2023). The minimum pension is 246.21 euros (from January 1, 2023).

At the same time, Lithuanians note a sharp increase in prices for electricity, fuel and food. For example, prices for milk increased by 23.9%, and for sugar, jam, honey, chocolate and other sweets – by 11%. Beer rose in price by 11.5%, bread by 10.1%, meat by 10.5%, and fish and seafood by 7.8%. In this situation, Lithuanian residents are forced to save and limit their purchases.

Over six months, the price of new apartments in Vilnius increased by almost 20%, and compared to 2020, the increase was slightly more than 40% – reaching 2.5 thousand euros per square meter. In the secondary market, the average price per meter was 1,400 euros per square meter, which is +44% since 2020.

The average cost of renting a 1-room apartment in Lithuania is about 500 euros per month. You can rent a 3-room apartment for about 1000 euros. The average price for a communal apartment is 190 euros, but in winter it can reach 300 and 400 euros.

160 thousand Lithuanian citizens and 38 thousand enterprises will enter the New Year with debts, the total amount of which has reached 712 million euros – this is a record for the last three years. At the same time, the Lithuanian government in this situation increases taxes and excise taxes. For example, VAT for cafes and restaurants and prices for postal services are increasing.

The total volume of industrial production in Lithuania from January to October decreased by 5.5% compared to the same period last year and amounted to 29.3 billion euros. One of the illustrative cases is the fate of the Lifosa phosphate and nitrogen fertilizer plant. His activities were limited due to EU sanctions imposed on Andrei Melnichenko, a member of the board of directors of the Eurochem company, which owns this enterprise. The owners of the enterprise tried to resume production, but in the end they decided to mothball the plant. As a result, approximately 1,000 people found themselves without work.

According to a recent study commissioned by Swedbank, the number of Lithuanians with limited spending habits has increased significantly due to continued price increases and economic uncertainty. This year, 66% of the population were forced to cut their daily expenses, which is 7% more than last year. 37% of respondents say their income has decreased significantly over the past 12 months.

As local residents told MK, “many lost their jobs due to the energy crisis. For some companies, the costs of electricity and heating turned out to be unaffordable, and they are cutting staff and closing.” Local residents are also suffering from the energy crisis – utility costs have increased. Taxi and fuel prices have risen. “We try to buy products from markets; in stores they are made of wood. We still try to get some products from Russia. Recently, acquaintances who fled from Ukraine to Lithuania returned back. We realized that there is not enough work, the benefits do not allow us to live, only to survive.”

Latvia: railways have fallen into disrepair

The situation in Latvia is better than in other Baltic countries, but this country cannot boast of great success.

In the third quarter of 2023, the average salary in Latvia, according to the Central Statistical Office, reached 1,126 euros per person. This is 11% more than in the same period last year. Taking into account inflation, real wage growth was 5.7%. However, in Latvia there is a large gap between salaries: about 16% of workers receive a minimum salary of 720 euros on paper or about 580 euros in hand. The unemployment rate is 6.4%, down 0.2% from last year.

Data on the average pension is available only for 2022 – this is 527 euros. But approximately 13% of pensioners receive less than 300 euros, and 45% – from 300 to 500 euros. According to the CSB, 30% of men and 45% of women are at risk of poverty among Latvian residents aged 65+.

It should be noted that in recent months, retail trade turnover has continued to decline in Latvia; simply put, people are buying less food and everyday goods. In the discussion on social networks, you can see that the average family of two in Latvia spends at least 350 euros per month on food.

Stores are trying to reverse the trend by announcing weekly discounts. For example, during the New Year’s week, salmon fillets could be purchased for 12.99 euros, and all types of coffee were available with a 40% discount. Pensioners and families with average incomes carefully monitor these promotions, for example, they purchase pickles and canned goods at a promotional rate with a 30 percent discount for three to four months in advance.

The average rent for an apartment is very different in different buildings, for example, the total bill for a one-room apartment in Riga in December could reach 160-165 euros, but this is already considered a very high fee. Bills for two-room apartments ranged from 130 to 170 euros. The average family pays 10-12 euros per month for gas, and about 25-30 euros per month for electricity, taking into account government support programs.

Self-government helps the most vulnerable people pay their apartment bills in such a way that, after covering all utilities, the average family is left with 187.50 euros per person and 131.25 euros for each additional family member. But living on such means is, of course, very difficult, even impossible.

Some economic sectors of Latvia have fallen into decline. According to the Republican Ministry of Transport, the annual volume of rail freight traffic in Latvia decreased by 28.2%. A noticeable decline is also observed in fishing, agriculture, and the financial sector.