Projections of Lithuanian Economic Indicators (November 2011)

Vilnius, November 30. According to the data by the Statistics Lithuania, gross domestic product over three quarters of 2011, as compared with the same period of 2010, grew by 6.4 per cent. Particularly fast GDP growth, as projected, was caused by increasing production and recovering consumption. After evaluation of currently emerged trends, annual GDP growth should be in line with the central development scenario and represent 5.8 per cent.

Despite the agreement on debt crisis management tools in eurozone reached in end of October 2011 during the European Council of Heads of State or Government, still great uncertainty remains about the external environment. Therefore, it is likely that due to worse main export market perspectives in 2012, the demand for Lithuanian exports will decrease and it will slow down GDP growth to 2.5 per cent (instead projected previously 4.7 per cent). The central scenario envisages rapid restitution of the insured deposits of the Bank Snoras under bankruptcy, therefore, the bankruptcy effect to GDP is reduced several times and makes up 0.1-0.2 per cent of GDP. Lithuanian export market perspective in the European Union remains to be the basic risk factor in review of the economic development scenario.

The Lithuanian export market development perspectives are updated taking into consideration the slump in confidence of the entrepreneurs working in industry polled by statisticians. Rapidly changing export trends are also evidenced by the change in industry production in October of the current year: during the year industry production decreased by 1.3 per cent, though in September industry production over the year grew 8.2 per cent. In quarter III, as compared with quarter II, the number of the employed decreased by 0.4 per cent, though during the period of 2002–2010 in quarter III, as compared with quarter II, the increase in number of the employed, in average, used to make up 0.7 per cent. Economic development perspectives are positively affected by the remaining high services confidence index.

Due to decreasing confidence of entrepreneurs in the nearest economic perspectives and growing pessimism regarding the possibilities of demand and exports of manufactured production, a marked worsening in the indicators on the number of employees projected by employers was observed in the past two months. Therefore, a slower growth of employment, wages and inflation is projected. The unemployment rate projection for the year 2012 is increased up to 14.0 per cent (it was 11.9 per cent), the wage growth projection is reduced down to 3.0 per cent (it was 5.5 per cent). Due to lower global prices of oil, foodstuffs and other products anticipated by the European Commission, inflation calculated according to the harmonised index of consumer prices is reduced to 2.5 per cent (it was 3.4 per cent).

The Ministry of Finance leaves the GDP Growth Forecast for 2013–2014 unchanged – given the currently formed plans for absorption of EU assistance under the Financial Perspective for 2007–2013 and the decrease in labour force due to ageing of the society, GDP growth in 2013–2014 will accordingly reach 3.7 – 3.4 per cent.

Projections of Lithuanian Economic Indicators (November 2011)