Projections of Lithuanian Economic Indicators (November 2012)

Vilnius,29 November 2012. The Ministry of Finance changes the perspectives of the main macro-economic indicators for the years 2012 and 2013 after the reassessment of the Lithuanian economic situation and its development trends,. The major factors providing the basis to increase GDP and average wage growth perspectives as well as to reduce unemployment and inflation perspectives is a record grain harvest and further rapidly growing Lithuanian exports despite the downturn in the EU.

The volume of agricultural production in the third quarter of the current year, as compared to the same period of the previous year, grew by 14%, and exports of all goods and services increased by 10.6% over the year.

According to the updated scenario, the projected GDP growth in the current year, as compared to that published in September, is increased by 1 percentage point – up to 3.5%.  Expectations with regard to general government financial indicators remain the same as in September: in 2012 general government deficit will be below 3% of GDP.

In 2013 GDP chain-linked volume growth remains unchanged. It is expected that general government deficit will keep decreasing in accordance with the Stability and Growth Pact requirements and it will be below 2.5% of GDP.

Taking into consideration the data of 2011-2012 annual and quarterly results of the Labour Force Survey published by Statistics Lithuania, the Ministry of Finance has updated the perspectives of the number of the unemployed and its change trends.

Under continued rapid export growth and the increasing number of vacant jobs, the unemployment rate is decreasing faster than anticipated in September: in 2012 it will account for 13%, and in 2013 – 11.5%, i.e. by 0.8 and 1.3 percentage point, accordingly,  lower than anticipated in the scenario published in September.

In 2012 the growth of the average gross monthly earnings (including individual companies) will accelerate by 0.4 percentage point – up to 2.8 %, while the average annual inflation (according to the harmonised consumer price index) will stand at 3.1 % – by 0.1 percentage point higher than planned in September.

In shaping the central economic development scenario perspectives, as in September 2012, the assumption that EU will succeed in managing the euro area financial stability risks was used as a basis, while external environment assumptions are in line with the Commission services’ 2012 Autumn Forecast projecting economic recovery  both in the EU and euro area in 2013. 

However, under the most historically severe European financial and economic crisis a great uncertainty still remains. In the 3^rd quarter of 2012 the euro area economy continued to decline by 0.6 % and the technical recession was recorded. Still, doubts remain that all credit crunch affected EU Member States will implement successfully the structural reforms and overcome the crisis. There is a risk that, due to intensified euro area problems, a credit risk of the banking sector may sharply increase, which would negatively affect financial stability.

The positive report on Greece by three international creditors, the EU, IMF and ECB  “troika” was delivered on 12 November 2012. It served the basis for important decisions by the EU heads of state or government concerning further funding terms for Greece and fiscal deficit and debt reduction plans of the EU Member States. Euro area finance ministers and the International Monetary Fund approved delivery of further assistance to Greece. These decisions by the EU heads of state or government will have impact on international markets and further EU economic development.

In case of emerge of additional data on verification of negative risks and their impact on a real sector, the projections may be changed. Lithuanian export market perspective in the EU further remains to be the basic risk indicator for the review of the economic development scenario.