Roundup: IMF revises down Lithuanian economy growth for 2015 due to Russia, CIS factors

The International Monetary Fund (IMF) expected Lithuania's economy to expand 2.8 percent in 2015, down from its 3.3 percent projection last October, the IMF said on Wednesday after finishing its regular mission in the Baltic country.

The fund said that domestic demand will remain the main growth driver this year.

Christoph Klingen, chief of the IMF Staff Mission to Lithuania, said that the fund had factored the situations in Russia and the CIS into what it means for trade and confidence in Lithuania.

CIS refers to the Commonwealth of Independent States, a regional organization whose participating countries are former Soviet Republics, formed during the breakup of the Soviet Union.

However, the role of trade with Russia is "sometimes exaggerated because a lot of trade is re-exports and has a limited impact for Lithuania," he was quoted as saying at a press conference by BNS news agency.

"Improvements in outlook brought by entry to the euro area should offset the sluggishness in CIS trade partner countries. Exporters have already demonstrated their excellent abilities to adjust by refocusing exports on new markets," the report said.

Algirdas Butkevicius, Lithuania's Prime Minister, said that the current data confirms government's successful efforts in coping with the challenges through the diversification of export markets and thus mitigation of the impact of Russia's embargo.

"A recent study by logistics companies revealed that irrespective of the loss of exports last year which was successfully absorbed, businesses succeeded to earn an additional 18 million euros," Butkevicius was quoted in a statement released by the government.

Lithuania's economy growth is set to pick up to 3.2 percent next year, the IMF noted.

According to the fund's findings, with a gradually improving external environment, the near term driver and long-term performance would remain contingent on structural reforms, investment, and innovation policies.

Klingen, the head of IMF mission in Lithuania, repeatedly urged the country to further follow the rules of fiscal discipline, implement labor market, tax system reforms and encourage further investments.

Lithuania's public finances will continue to face various pressures in the years ahead, the fund stated.

"Apart from looming aging costs in pensions and health, committed increases in defense spending and labor taxation reductions in support of job creation will need to be offset elsewhere," the IMF said.

It also stressed the need to make "the best possible use of available labor resources in the face of adverse demographics".

Lithuania became a member of the IMF in 1992. Bilateral cooperation is based on regular economic consultations with the IMF, therefore, the fund conducts regular surveillance of the country's policies.

Late in March, the Finance Ministry reduced its forecast for Lithuania's GDP growth this year to 2.5 percent, from its 3.4 percent forecast last September.

The Central Bank of Lithuania has recently revised down the country's GDP forecast to 2.7 percent in 2015, to compare with 3.1 percent projected in December, mostly due to the worse outlook for the Russian economy which is posing challenges to Lithuanian exporters. Enditem