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Lithuania needs bold reforms to ensure further GDP growth: IMF

Xinhua, March 17, 2016 Adjust font size:

Lithuania's economy will expand by 2.7 percent in 2016, while further growth pace depends on structural reforms implemented by the government, the International Monetary Fund (IMF) said.

"Macroeconomic environment is fairly good, exports have stabilized, export markets have been diversified; inflation is relatively low," Christoph Klingen, chief of the IMF mission in Lithuania, was quoted as saying by local website vz.lt.

According to him, these favorable conditions will lead to a decent GDP growth this year. The Lithuanian economy advanced by 1.6 percent in 2015.

The IMF forecast is among the most modest to compare with projections announced by other institutions. Lithuania's finance ministry expects the country's economy to grow by 3.2 percent, while European Commission projects 2.9 percent GDP growth.

IMF expects that over the medium term, Lithuania's GDP growth is expected to accelerate further to around 3.5 percent, however, this is "contingent on further reforms."

Lithuania should implement bold structural reforms in order to stay on a sustainable growth path, IMF noted in its report.

"The emphasis should be on measures that promote growth and reduce income inequality, which is among the highest in the EU," the report says.

Labor market reforms, transforming Lithuania's ineffective health system and oversized education infrastructure, further improving business climate, continuity of disciplined fiscal policy were mentioned by IMF as priorities for Lithuania's government.

On the revenue side, wealth taxation remains underdeveloped and tax administration improvements have a long way to go, IMF underlined.

"The overall reform package would need to be budget neutral to preserve hard won fiscal gains," it said.

Lithuanian Prime Minister Algirdas Butkevicius promised to analyze IMF recommendations.

"Part of them will be implemented as a complex, together with a new social model prepared by the government. I hope the parliament will adopt it without significant deviation from the government's initial draft," Butkevicius said. Endit