Roundup: Lithuania maintains growth despite external shocks

Lithuania maintains its economic growth momentum, despite the external shocks, Lithuania's Prime Minister Algirdas Butkevicius and European Commission Vice President Valdis Dombrovskis said on Tuesday.

"We feel the benefits of the membership in the eurozone," Butkevicius was quoted as saying in a statement released after meeting with Dombrovskis in the capital Vilnius.

"The single European currency helps Lithuania withstand external shocks: Lithuania has managed to retain the positive growth," the head of government added.

Lithuania has been recording worsening trade conditions in its Eastern exports markets recently, especially Russia and the Commonwealth of Independent States (CIS). Russia accounts for about one-fifth of Lithuania's total exports.

Dombrovskis attended an international conference in Vilnius about the state of play in Lithuania after joining the euro zone.

"Now all the Baltic States share the same currency; this adds to the attractiveness of the whole region and greatly helps further economic integration of the three countries," Dombrovskis said in his speech given at the event.

"It is not a secret that from outside, the three Baltic States are often considered as one market, if we like it or not," he noted.

Dombrovskis said Lithuania's accession into the eurozone served as a proof that "the European single currency not only survives, but grows and integrates new members."

The first year in the eurozone is going rather smoothly for Lithuania, Dombrovskis said. "Despite a slowdown in real GDP in the first quarter of this year, economic growth is expected to remain resilient," he continued.

Lithuania's economy is driven by domestic demand, which benefits from rising wages, falling unemployment and subdued inflation, the European Commission vice president said.

Nevertheless, Lithuania's international competitiveness could be stepped up. The Commission also points out the need to address the issue of the declining working age population, as well as better match between education and labor market needs.

Butkevicius said his country is committed to continuing the current fiscal discipline. Regarding social and labor market issues, the government has endorsed a package of social model projects aimed to implement the Commission's recommendations, as well as is working on better education-labor market match, the head of government said.

According to the European Commission spring economic forecast, Lithuania's real GDP (gross domestic product) is expected to grow this year by 2.8 percent, which is well above the European Union (EU) average. Lithuanian government's projection stands at 2.5 percent.

Lithuania's central bank recently cut the country's GDP forecast for 2015 by 0.7 percentage points to 2 percent.

The Commission projects 1.8 percent GDP growth for the EU this year and 1.5 percent for the euro area.

According to the Commission vice president, global and European economies are on the recovery path, while getting an extra boost from temporary factors such as low oil prices, a weaker euro and a quantitative easing by the European Central Bank.

Among the European economy's weaknesses, Dombrovskis mentioned high rates of unemployment and high level of both private and public debt, as well as shortfall of investment over the recent few years.

He called for coordinated boost of investment over the EU, following the Investment Plan for Europe and urged to implement structural reforms in the member states, which would partly serve as a basis for long-term sustainable growth. Sticking to fiscal discipline is one of the main growth's pillars too, Dombrovskis stressed.

The need to implement structural reforms was also stressed during Dombrovskis meeting with Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.

"The accommodating policy of the ECB... is already giving fruit; however, monetary policy instruments alone are not sufficient to ensure enduring economic growth," Vasiliauskas agreed.

"It is important that the governments do not wait for a crisis to implement necessary structural reforms," he added. Endit