Projections of Lithuanian Economic Indicators (May 2010)

Three-Year Budget is Planned on the Basis of Basically Unchanged Scenario of Economic Indicators: Starting from this Year, the Economy will Begin to Recover

According to the data by the Department of Statistics, gross domestic product in the 1^st quarter of  2010, as compared with the same period in 2009, decreased by 2.9 per cent – it shows that GDP fall is in line with GDP growth path for 2010 envisaged in the central scenario in February.  It is envisaged that due to the investment climate in Lithuania and recovery of export markets as well as the absorption of advanced EU assistance the annual growth in the 2^nd quarter is expected to make up about 4 – 5 per cent. Therefore, GDP growth scenario of 1.6 per cent for 2010 created in February will basically remain unchanged.

At present the only contributor to national economic growth is exporting sectors, while domestic-demand oriented sectors still show only initial signs of stabilisation. Levelling –off of wages on-going along with growth in exports and export prices demonstrate an improved competitiveness of Lithuania’s economy.

It is envisaged that positive changes in export observed from the second half of the year 2009 will further continue and from 2011 will make a sufficient background for domestic demand growth. However, due to a necessity to consolidate public finances, the consumption of this sector will be decreasing till the year 2012.

All the aforementioned positive factors will create conditions for GDP growth of 2.8 per cent in 2011. It is envisaged that in 2012, due to a negative effect of decreased investments during the crisis in 2009 to economic potential growth, GDP growth will slow down to 1.2 per cent. It is envisaged that after enhance of investors’ confidence in regional perspectives and increase of investments into exporting sectors, GDP could grow by 2.4 per cent in 2013.

The scenario of economic indicators for budget planning is created on the basis of common assumptions for EU economic development used by the European Commission in spring. Economic growth will depend on the situation in global financial markets and economies of main foreign trade partners as well as Lithuania’s competitive ability. 

Despite economic recovery planned in 2010, the rate of unemployment will further remain reasonably high during the entire medium term. It is envisaged that the rate of unemployment will grow up to 16.7 per cent in 2010, while from 2011 it will start gradually decreasing and in 2011–2013 it will represent 15.5 per cent, 13.9 per cent and  12.3 per cent, accordingly.

Statistical data shows that, after evaluation of seasonal impact, fall in national wages slightly decelerated (especially in construction sector), while in private sector in the 4^th quarter of 2009, as compared with the previous quarter, wages even increased by 0.4 per cent, therefore, the dynamics of wages will be more favourable by several percentage points than it was planned in February: in 2010 wages may fall by 5.3 per cent, while from the year 2011, in 2011–2013,  wages are envisaged to grow by 0.6 per cent, 0.9 per cent and 1.9 per cent, accordingly. 

Due to higher growth in global prices of oil, food and other products predicted by the European Commission as well as changed wage trends, the perspective of price change estimated by coordinated consumer price index (hereinafter referred to as CCPI) is changed accordingly: substantially slower deflation estimated by CCPI is envisaged in February. In 2010 the average annual deflation will represent 0.1 per cent, while inflation in December could constitute about 0.6 per cent. In 2011 the average annual inflation would make up 1.5 per cent, in 2012 – 2.0 per cent and in 2013 – 2.5 per cent.