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Lithuania's central bank sees significant impact after euro adoption

Xinhua, December 22, 2015 Adjust font size:

Bank of Lithuania presented on Monday its economic assessment of the euro adoption impact on the country's economy.

Lithuania, a Baltic Country, became the 19th member of the euro zone on 1 January 2015, leaving its national currency litas.

Lithuania's central bank sees the upgraded credit ratings, lower borrowing and exchange costs as a significant impact.

"As was expected, residents, businesses and the entire economy gained tangible benefits of tens of millions due to lower borrowing costs," Vitas Vasiliauskas, the Chairman of the Board of the Bank of Lithuania, said in a press release.

"Significant amounts have been saved on vanished foreign exchange costs, cheaper transfers in euro," he added.

According to the bank's estimates, the impact of the euro adoption on the interests rates allowed the residents and the businesses to save around 40 million euros. Lower cross-border fees saved the residents and businesses up to 18.5 million euros this year.

For the country's government, the upgraded credit ratings are estimated to lower borrowing costs by 70 million euros during this year.

In comparison, Lithuania's expected state and municipal budget spending is estimated to amount to 10.045 billion euros next year.

With exchange costs disappearing for the residents, banks in Lithuania felt a 10 million euros negative impact on their income over the nine months of this year. The central bank forecasts, the income will fall by 14 million euros for the whole year.

Before the euro adoption, the country's residents feared the currency changeover would lead to rise in inflation. The most visible impact of the euro adoptions was on the prices of services, according to the Eurostat, the EU Statistical Office.

All in all, Lithuania saw a 0.5 percent deflation in November, compared to the same month a year ago, due to low fuel and gas prices. Endit