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Roundup: Lithuania's economy grows at slowest pace in five years: statistics

Xinhua, May 1, 2015 Adjust font size:

Lithuanian gross domestic product (GDP) increased by 1.5 percent in the first quarter of 2015, compared with the corresponding period of 2014, statistics released on Thursday showed.

Seasonally adjusted, the growth was the slowest since the third quarter of 2010.

Compared with the previous quarter, the country's GDP contracted by 0.6 percent, it is the first contraction since second quarter of 2012, Lithuania Statistics said in its flash estimate.

In spite of modest GDP performance, economists argue that Lithuania is going through a transitional period determined by the changing external economic environment, hence better results are expected at the end of this year.

"We should not forget that many other countries of the EU would see this pace of development as a huge achievement," Gitanas Nauseda, advisor to SEB bank president in Vilnius, said in a statement.

According to him, Lithuania currently is getting used to the new economic reality. Lithuanian exporters are searching for new export destinations to substitute Russian market which has been nearly lost due to trade embargoes, the SEB said. It could take from 3 to 5 years until these efforts pay off, the bank noted.

Moreover, Lithuanian consumers' spending remains modest due to the new currency euro which has been introduced in the country on January 1 this year.

Lithuanian GDP has been dragged down by Russian factor, which caused drastic contraction of exports, and slowing investments due to geopolitical uncertainty, Rokas Grajauskas, Danske Bank analyst of the Baltic States in Vilnius said.

According to the bank, exports of Lithuanian goods to Russia shrank by 35 percent in January and February this year, the worst result after 2008-2009 financial crisis when 47 percent contraction of exports to Russia was recorded. Total Lithuanian exports declined by 6.9 percent in the first two months this year.

Consumers' activity should gather pace later on this year and remain one of the main economic drivers, while geopolitics will remain the main factor to cause economic uncertainty, Danske Bank suggests.

The bank expects Lithuanian economy to grow at 2.5 percent this year and accelerate to 3.2 percent in 2016.

Based on Lithuania's Stability Programme, approved by the government earlier this week, Lithuania's GDP is projected to expand by 2.5 percent in 2015, by 3.2 percent in 2016, 3.5 percent in 2017 and 3.9 percent in 2018. Endit