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Roundup: Bank of Lithuania significantly cuts GDP growth forecast

Xinhua, June 10, 2015 Adjust font size:

The Bank of Lithuania sharply reduced the country's GDP forecast for 2015 due to worsening situation of exports, the bank announced Wednesday.

Lithuania's economy will expand by 2 percent this year, compared with previous 2.7 percent forecast.

"The economy has been driven forward by domestic consumption but worse performance of exports to Russia has altered projections," Raimondas Kuodis, deputy chairman of the board of the Bank of Lithuania, was quoted as saying in a statement.

The bank expects Lithuania's economy to accelerate to 3.4 percent in 2016 (the previous projection was 3.5 percent).

According to Kuodis, external conditions aggravated the situation in sectors such as transport, food and meat.

"Even though this year's growth projection was reduced, Lithuania will be among the leaders in Europe in terms of its rate of development," Kuodis noted.

"First-quarter performance was somewhat weaker than we expected but we think that economic activity will increase in the course of the year," Gediminas Simkus, director of Economics and Financial Stability Service of the central bank, said at a news conference, BNS news agency reported.

Lithuania's Ministry of Finance projects the country's GDP to grow by 2.5 percent in 2015.

Lithuanian economy contracted the most among EU member states in the first quarter of 2015, data from Eurostat, the EU's statistics office, showed on Tuesday. Lithuania's GDP, seasonally adjusted, decreased 0.6 percent during the first quarter of 2015, compared with the previous quarter.

In the first months of this year Lithuania's exports to Russia shrank by approximately one-fourth, the central bank reported. This was not only due to the aggravated economic situation in this neighboring country, but the depreciation of the rouble as well, due to which the Russian population can afford buying less foreign goods.

"The Russian economy is the factor having the biggest effect on our country," Simkus said.

According to him, so far, it has been difficult to compensate the losses sustained in the Russian market with new discoveries in new markets.

Exports to Russia account for about one-fifth of Lithuania's total exports. However, it's mostly re-exports, the bank's officials stressed.

Nevertheless, the central bank sees grounds for cautious optimism due to the strengthened economic situation in the EU, where Lithuania sells most of its goods and services.

The Bank of Lithuania expects Lithuania's total exports to pick up by 0.1 percent in 2015 (the previous projection was 3.7 percent).

Furthermore, the central bank expects Lithuanian households' purchasing power to increase, due to projected average wages and salaries growth by 4.9 percent both in 2015 and 2016. Endit