The collapse of the Soviet Union led to an economic crisis in Lithuania. The transition from an economy that was centrally controlled by Moscow to a free-market, competitive economy was difficult. Huge collective farms had to be reorganized, and many of the large industrial plants built by the Soviets were no longer needed. Many environmental problems caused by industrialization under Soviet rule needed to be addressed. In the first few years following independence, unemployment and inflation rates increased dramatically. Today, however, the Lithuanian economy is stabilizing in many areas.

Of Lithuania's approximately two-million-strong labour force, 42% work in industry and construction, 40% in the service sector and 18% in agriculture and forestry. The main industrial products are electronic and optical goods, precision machinery and spare parts, textiles and processed foods. In the agricultural sector, cereals, sugar beets, potatoes, vegetables and flax are the main crops. Lithuania produces more than 40% of the rye, barley and wheat grown in the Baltics. Tourism is a growing industry.

Lithuania is an important producer of electricity and exports power to Latvia and Belarus. Some power is generated by burning coal and peat and there is a large hydroelectric station on the Nemunas River. The Ignalina nuclear power plant in Visaginas was built between 1978 and 1983 and supplies 80% of Lithuania's electricity. It is the same type of plant as the Chernobyl plant and is due to be decommissioned in 2010. In the future, Lithuania may be able to exploit oil reserves near the Baltic coast.

Shortly after independence was declared in 1990, the government found that many workers did not have up-to-date job skills. It passed legislation to establish training and retraining programs for the work force. The government still encourages continuous training, which is necessary in a world of rapidly advancing technologies.

   Did you know?
Lithuania's three largest cities are Vilnius (the capital and a major industrial centre), Kaunas (the capital during the period of Lithuanian independence between the two world wars), and Klaipeda (a commercial port on the Baltic Sea).