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Roundup: Lithuanian central bank slashes economic growth forecast to 2.6 pct

Xinhua, March 17, 2016 Adjust font size:

The Bank of Lithuania on Thursday slashed the country's GDP growth and inflation forecast for this year amid a weakening Russian economy and increased global uncertainty, but expects the country's economy to grow faster than last year.

The bank expects Lithuanian economy to grow by 2.6 percent this year, or 0.3 percentage points slower than estimated in the previous forecast in December.

Lithuania's central financial institution has considerably slashed the inflation forecast citing declining energy prices. An average annual inflation of 0.5 percent is expected this year, compared to 1.4 percent forecast made in December.

Lithuania's central bank worsened the outlook of Lithuanian economy growth for this year for the fourth time in a row.

"The outlook for Russia's economy is weak, the growth of the euro zone economy is slower than expected, the uncertainty of the growth outlook for U.S. and emerging markets has increased," Raimondas Kuodis, deputy chairman of the central bank's board, said in a statement.

Russia remains Lithuania's most important exports partner with the share of 13.7 percent of total exports in 2015. Lithuania's exports to Russia are mostly based on re-exports of goods from other countries.

"The decline in Russian economy is expected to continue this year. Therefore, the contribution of exports to Lithuanian economy this year will be weaker than expected," said the bank in its latest forecast.

However, the Bank of Lithuania remains confident that domestic factors, such as decreasing unemployment, growing household income and business capital investments are to support the country's economic growth. The bank says that domestic demand is the main engine of economic growth.

Last year, the unemployment level in Lithuania decreased to 9.1 percent.

In the fourth quarter of 2015, average gross monthly pay in Lithuanian economy grew by 5.9 per cent, compared to the same period in 2014. Real growth adjusted for inflation was 6 percent.

This year, the bank expects gross wages to grow by 5.3 percent. In 2017, Lithuania's central bank expects the country's economy to grow by 3.4 percent. Last year, Lithuania's GDP grew by 1.6 percent. Endit