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The Ministry of Finance Renews the Perspectives of Macroeconomic Prognosis

Date

2007 11 09

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Vilnius, November 9, The Ministry of Finance announces the perspectives of the macroeconomic projections taking into consideration the economic indicators released by Department of Statistics in the end of October 2007. The results of III quarter of 2007 indicate that overly optimistic confidence of consumers on economical development was not corrected by official information about moderate economical development perspectives and risks, formed in a real estate market; therefore credit increase has been accelerating still. Credit stimulated demand and growth of export have determined greater 2007 GDP growth. The GDP growth will be close to 10 percent.

According to consumer price index the inflation of 2007 and 2008 will be greater than it was prognosed in August. Objective factors also contributed to those indicators: the increased oil prices by 12 percent in September will lift 2007 average annual inflation rate to 5,5 percent and in December 2007 annual inflation rate and 2007 average annual inflation rate might increase to 6,5 percent.

Healthy and orderly decrease of credit deceleration and real estate prices correction, moderation of GDP growth and inflation levelling-off that was observed in the second quarter of 2007 in Estonia supports the assumptions that natural slowdown cycle of of economy in Lithuania will start a few quarters later in 2008. As the uncertainty on the scope and timing of the natural slowdown of economy still remains, there is no reason to change 2008-2010 macroeconomic projection perspectives, which were announced in September by Ministry of Finance. If the natural cyclical deceleration of economy in Lithuania possibly starts later than it was assumed in the beginning of September, the deceleration of growth of GDP in 2009 will be accordingly compensating for the delay and the projected acceleration of growth in 2010 would be postponed towards 2011-2012.

In 2008 when credit financed demand pressure on prices diminish and oil price stabilizes at 56 euros per barrel the inflation of 2009-2010 would gradually slow, as it was forecasted, and at the end of period would come down to 2,6 percent.

 

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