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UPDATE 1-Lithuania economy seen falling 19.3 pct in '09-c.bank
Thu, 6th Aug 2009 16:56
VILNIUS, Aug 6 (Reuters) - Lithuania's central bank said on Thursday it saw the country's economy contracting 19.3 percent in 2009, which would mean the country's real gross domestic product shrinking to the levels of 2004-2005.
Lithuania's economy nosedived as the main export markets shrank and cheap money from dominating Scandinavian banking groups dried up, sending the country into its worst recession since the split from the Soviet Union in early 1990's.
The central bank forecast came after the statistics office had said the country's GDP preliminary dropped 22.4 percent year-on-year in the second quarter, a way exceeding market forecasts for 16.7 percent.
On Thursday, the bank said it expected GDP to fall at a slower pace in the second half of the year.
'Taking into consideration the strong fall in the first half of the year, it is expected, that the economy is to fall at a slower pace in the second half, and GDP will contract 19.3 percent this year,' the central bank said.
The latest forecast for 2009 is worse than 15.6 percent fall expected in May, and worse than 18.2 percent forecast of the Finance ministry.
'I think, the central bank forecast is more realistic, as they took into account the second-quarter data,' Violeta Klyviene, a senior Baltic analyst at Danske bank, said.
The bank added economy was to fall 5.2 percent next year, also worse than expected 4.5 percent earlier.
'The expected economic decline in 2009 will bring Lithuania's real GDP to the level of the years 2004-2005,' the central bank said in a statement.
This could be historically comparable to the Scandinavian crisis in 1993 or Indonesian crisis in 1998, when economy saw similar falls in real terms.
A faster recovery of the global economy and Lithuania's export markets would slow down the contraction, but growing unemployment, falling property prices and wages may put more pressure on the domestic consumption, the bank said.
'Based on this scenario, GDP may fall 2 percentage points more,' the central bank said.
Unemployment is expected to reach 15.7 percent in 2009 and 19.3 percent in 2010.
The bank also said that the reported contraction could be less due to growing shadow economy, but that was difficult to estimate.
The bank left its annual average inflation forecast for 2009 unchanged at 3.9 percent, and said the country was to see annual average deflation of 2.0 percent in 2010.
The plans to close country's Sovie-era Ignalina nuclear power plant at end-2009 would push up electricity prices, but the rise should be offset by general deflationary
trends related to economic decline and fall in wages.
The current account deficit, once a worry for investors, would come into small surplus of 0.2 percent of GDP in 2009 after a deficit of 12.2 percent in 2008, and will stay in a surplus of 1.9 percent in 2010, the bank said.
(Reporting by Nerijus Adomaitis; Editing by Ron Askew) Keywords: LITHUANIA ECONOMY/
(+37064191386; nerijus.adomaitis@reuters.com)
COPYRIGHT
Copyright Thomson Reuters 2009. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Lithuania's economy nosedived as the main export markets shrank and cheap money from dominating Scandinavian banking groups dried up, sending the country into its worst recession since the split from the Soviet Union in early 1990's.
The central bank forecast came after the statistics office had said the country's GDP preliminary dropped 22.4 percent year-on-year in the second quarter, a way exceeding market forecasts for 16.7 percent.
On Thursday, the bank said it expected GDP to fall at a slower pace in the second half of the year.
'Taking into consideration the strong fall in the first half of the year, it is expected, that the economy is to fall at a slower pace in the second half, and GDP will contract 19.3 percent this year,' the central bank said.
The latest forecast for 2009 is worse than 15.6 percent fall expected in May, and worse than 18.2 percent forecast of the Finance ministry.
'I think, the central bank forecast is more realistic, as they took into account the second-quarter data,' Violeta Klyviene, a senior Baltic analyst at Danske bank, said.
The bank added economy was to fall 5.2 percent next year, also worse than expected 4.5 percent earlier.
'The expected economic decline in 2009 will bring Lithuania's real GDP to the level of the years 2004-2005,' the central bank said in a statement.
This could be historically comparable to the Scandinavian crisis in 1993 or Indonesian crisis in 1998, when economy saw similar falls in real terms.
A faster recovery of the global economy and Lithuania's export markets would slow down the contraction, but growing unemployment, falling property prices and wages may put more pressure on the domestic consumption, the bank said.
'Based on this scenario, GDP may fall 2 percentage points more,' the central bank said.
Unemployment is expected to reach 15.7 percent in 2009 and 19.3 percent in 2010.
The bank also said that the reported contraction could be less due to growing shadow economy, but that was difficult to estimate.
The bank left its annual average inflation forecast for 2009 unchanged at 3.9 percent, and said the country was to see annual average deflation of 2.0 percent in 2010.
The plans to close country's Sovie-era Ignalina nuclear power plant at end-2009 would push up electricity prices, but the rise should be offset by general deflationary
The current account deficit, once a worry for investors, would come into small surplus of 0.2 percent of GDP in 2009 after a deficit of 12.2 percent in 2008, and will stay in a surplus of 1.9 percent in 2010, the bank said.
(Reporting by Nerijus Adomaitis; Editing by Ron Askew) Keywords: LITHUANIA ECONOMY/
(+37064191386; nerijus.adomaitis@reuters.com)
COPYRIGHT
Copyright Thomson Reuters 2009. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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