Lithuania needs faster growth momentum: Swedbank

Lithuanian economy successfully withstood the challenges caused by Russia's import embargoes and accelerated during the third quarter this year, however, potential external risks to growth remain in place, Swedbank said in its Economic Outlook report released on Tuesday in Vilnius.

In its updated projections which match the bank's earlier forecasts, Swedbank expects Lithuanian economy to expand by 1.8 percent this year and accelerate to 3 percent and 3.3 percent in 2016 and 2017 respectively.

Domestic demand will remain the main growth driver next year, Swedbank said.

However, the growth rate is not sufficient for Lithuania to achieve its convergence goals with the European Union (EU), Nerijus Maciulis, chief economist at Swedbank in Vilnius, said during presentation of the report.

"Growth rate of around 3 percent is somewhat disappointing; moreover, it would not happen without government's stimulating policy with just temporary effect," Maciulis was quoted as saying by local website vz.lt.

According to him, in order to catch up with the EU development rate, Lithuania's economy should grow by 4.5 percent each year.

Negative demographic trends are among the biggest challenges for Lithuanian economy in the long term, Swedbank noted. The country's working-age population will decrease by 140 thousand people by the end of this decade, the bank underlined.

Last week, the European Commission (EC) downgraded Lithuanian GDP growth forecast to 1.7 percent, more than 1 percentage point down from its May's projection of 2.8 percent.

EC expects the country's economy to expand at 2.9 percent and 3.4 percent in 2016 and 2017, respectively.

Rising nominal wages are expected to support strong growth in private consumption, which is set to remain the main growth driver. Endit