ECB’s Šimkus: Pent-Up Demand, Investment to Spur Growth Next Year

20 April 2021

By David Barwick – FRANKFURT (Econostream) – Pent-up consumer demand, together with a surge in business investment, would lead to stronger growth after the pandemic is over next year, new European Central Bank Governing Council member Gediminas Šimkus said Tuesday.

In an interview with public broadcaster Lithuanian National Radio and Television, Šimkus, who took over the helm of the Bank of Lithuania earlier this month, declined to address monetary policy questions directly on account of the quiet period ahead of Thursday's Governing Council meeting.

The Lithuanian economy would grow in a range around 2.9% this year, he said, adding that it was ‘worth welcoming that the optimistic, pessimistic and baseline scenarios are all in a positive area.’

Once the pandemic is over, ‘we will no doubt see a recovery in consumption because it was delayed, people were at home, unable to spend money’, he said. Similarly, businesses hesitated to invest because of uncertainty, he said. ‘So it’s no surprise that stronger growth is expected next year.’

Šimkus conceded that in Lithuania, ‘activity in the housing market has increased, and that requires monitoring,’ but he warned against hastily making any ‘very big generalizations’ and suggested instead to ‘let us keep an eye on what is happening.’

‘The Bank of Lithuania has measures that it can take if it is a bubble’, he added, though ‘[i]f there is a bubble, wider measures would probably be needed.’