Perspectives on Projections of Lithuanian Economic Indicators (December 2009)

Outlook of Lithuania's Key Economic Indicators
Projected for 2009–2012

The data of the 3rd quarter of the current year showing the improvement in the dynamics of the annual goods and services export volumes by 5 percentage points and an increase in manufacturing (excluding production of refined oil products) that has been sustained for 4 months in turn enable stating that the European Economic Recovery Plan and a record harvest for the Lithuanian agriculture form the conditions for a smaller decline in real GDP; therefore, instead of 18.2% slump – about 15.2% decline is expected. On the other hand, the trends of export price decrease remain; thus, there is no basis for adjusting nominal GDP perspectives: it is likely that GDP, accounted at the prices of the year 2009, will decline by 18.3%

Over the 3rd quarter of the current year the number of the employed went up by 0.1%, while wages in industry increased by almost 1%. The data of the 3rd quarter, taking into consideration the influence of the season, shows that the decline rates of national wages went slightly slow (especially in construction sector); therefore, the dynamics of wages will be by a few percentage points more favourable for the employed: in 2009 the decline in wages would represent 4.6%, while in 2010 – 7.8%. A more decelerated decline in wages adjusts the perspective of the change in prices, which was estimated based on the harmonised consumer price index (hereinafter referred to as the HICP): an essentially slower deflation estimated based on the HICP is envisaged. The average annual inflation for 2009 estimated based on the HICP would account for about 4.2%, while the annual inflation for December 2009 will represent about 1.3%. In 2010 both the average annual deflation and the deflation for December might be about 1%. On the other hand, the GDP deflator for the 3rd quarter indicates that the decrease in the level of prices for goods of the Lithuanian origin exported or consumed inside the country accelerated over the year and accounted for about 5%. The GDP deflator shows that the prices for the goods of the Lithuanian origin are rapidly decreasing. Different tendencies of the GDP deflator and changes in the HICP show that inflationary pressure was influenced by the increase in the price for imported fuel at the end of the year.

The growth of industrial volumes in the 3rd quarter of 2009 coincided with stabilisation of unemployment indicators estimated based on the data of the population employment survey. Restructuring of the labour market shows that the data about a rapidly increasing number of the unemployed registered is predetermined by a more frequent decision of the unemployed to look for a job by registering with the Labour Exchange. The unemployment perspectives are adjusted taking into consideration the fact that a multi-annual link between the unemployed registered and the unemployed established by surveys has changed. Therefore, in the year 2009 the unemployment rate will be about 13.5%. In the year 2010 the unemployment rate will be additionally influenced by emigration tendencies. Currently, the perspective of the unemployment rate for 2010 is 16.7%; however, the contradictions between the stabilisation of the number of the employed and further rapid decline in the average relative number of the employees that were observed in the 2nd and 3rd quarters of 2009 show the risks of returning to the previous scenario of the increase in unemployment. As compared with the previous quarter, in the 2nd quarter of 2009 the number of the employed decreased just by 0.8%, while the average relative number of employees decreased by 3.6%, in the 3rd quarter the dynamics was different– the number of the employed increased by 0.1% and the average relative number of employees decreased by 3.6%, accordingly.

The outlook of GDP projections for 2010 will be presented after completion of the more detailed estimations at the beginning of the next year. The data of the 3rd quarter of 2009 shows the abundance of structural economic changes, which adjust multi-annual interactions among economic sectors; therefore, the model of indicator estimation and the perspectives of the majority of indicators may be adjusted substantially

Last updated: 18-03-2019